Prolonged caretaker govt in Pakistan to put IMF agreement at risk, report says

The USD 3 billion IMF bailout package for Pakistan could be at risk if the caretaker government’s tenure gets prolonged due to the likely delay in holding general elections in the cash-strapped country, a media report said on Wednesday. The IMF reached a staff-level agreement with Pakistan on a nine-month Stand-by Arrangement (SBA) in the amount of SDR 2,250 million (about USD 3 billion) in June. Since a delimitation exercise is going to be undertaken after the Council of Common Interests (CCI) approved the first-ever digital population census, a delay in the elections in Pakistan is on the cards beyond three months, The News reported. The delimitation exercise requires four months while two months more are needed to accomplish the election process. In the existing circumstances, the tenure of the caretaker regime might have to be extended up to six months at least to complete the process of political transition, the newspaper reported. Meanwhile, the Cabinet Committee on Energy (CCOE) has approved the revised Circular Debt Management Plan (CDMP) which, after getting approval from the federal cabinet, would be shared with the International Monetary Fund (IMF), the report said. It is yet to be seen how the IMF will respond to the revised CDMP on the envisaged targets, the report said. It said that when the Standby Arrangement (SBA) programme of USD 3 billion was designed, it was envisaged that it would be completed during the tenure of three different governments. The first instalment of USD 1.2 billion was released during the tenure of the outgoing Pakistan Democratic Movement-led regime. It was thought that the first review would be undertaken on the basis of first quarter (July-September) data of different sectors of the economy with the possibility of the Fund dispatching its review mission to Islamabad in the third week of October, the report said. If all targets were materialised, then the IMF’s Board might consider approval of a second tranche of USD 700 million in December 2023, it said. It was also envisaged that the second review might be undertaken in February 2024 and the SBA programme would be accomplished in March/April 2024. With the possibility of an extension in the tenure of the caretaker setup, the responsibility for materialising all structural benchmarks, performance criteria and indicative targets might lie with the caretaker government and there might be strict monitoring of all the key targets undertaken by the IMF mission. According to Section 230, a caretaker (interim) government shall only perform its functions to attend to day-to-day matters which are necessary to run the affairs of the government. Earlier, the media reports said that the Shehbaz Sharif government was considering amending Section 230 of the Elections Act 2017, empowering the caretaker set-up to take economic decisions and the amendments might be introduced in the National Assembly to allow the caretaker government to take decisions necessary to revive the economy. The five-year tenure of the 342-member lower house of Parliament is scheduled to expire on August 12. The Sharif government is expected to recommend the dissolution of the National Assembly today, leading to fresh elections. The full implementation of the IMF programme of the SBA is essential in order to graduate from the ongoing one and then qualify for another medium-term programme of the Fund beyond March/April 2024 to remove the vulnerabilities faced by Pakistan on repayment of external loans, the report added.