IMF denies claim of linking polls delay with fund’s conditions

ISLAMABAD: The International Monetary Fund (IMF) rejected Pakistan’s claim that its programme conditions were one of the reasons for the postponement of elections in two provinces, Punjab and Khyber-Pakhtunkhwa, saying Islamabad has the right to reprioritize expenses or raise additional taxes to meet constitutional obligations.

“There is no requirement under Pakistan’s EFF-supported programme that could interfere with Pakistan’s ability to engage in constitutional activities,” said IMF resident representative Esther Perez Ruiz.

The IMF has rebuked Pakistan’s claim that it is interfering in matters outside the scope of the $6.5 billion bailout package for the second time in four days, setting the record straight and refusing to offer its shoulder to the ruling Pakistan Democratic Movement(PDM).

The announcement came a day after the Election Commission of Pakistan postponed elections in Punjab and Khyber-Pakhtunkhwa until October 8, citing a lack of security and funds.

Also Read: ECP postpones Punjab elections to October 8

The statement also implies that Pakistan’s trust deficit with the IMF is growing as a result of Pakistan’s inability to meet its international and domestic constitutional obligations while blaming the IMF for its own failures.

“The IMF establishes aggregate general government targets (across federal and provincial government levels), and within these there is fiscal space to allocate or reprioritize spending and/or raise additional revenues to ensure constitutional activities can take place as needed,” Esther Perez explained.

The ECP estimates that elections in Punjab and K-P will cost Rs20.5 billion. Another Rs5 billion is required to hold by-elections for 93 National Assembly seats that are currently vacant. The ECP required Rs25.5 billion in total, which is not much when compared to the Rs11.2 trillion revised annual budget for this fiscal year. The required funds represent only 0.18% of the federal government’s annual budget.

The IMF resident representative also stated that decisions on the constitutionality, feasibility, and timing of provincial and general elections are solely the responsibility of Pakistan’s institutions, thereby setting the record straight.

Just this week, the Cabinet’s Economic Coordination Committee approved a Rs27 billion supplementary grant to avoid a diesel payment default to Kuwait. Two days ago, the minister for planning launched Rs150 billion worth politically oriented development projects for the youth of the country.

The ECP narrated a statement by the federal secretary of finance in its order postponing elections.

“Secretary Finance while briefing the Commission stated that due to the paucity of funds and financial crunch, the country is facing an unprecedented economic crisis and it was under compulsion by IMF programme which has set targets for maintenance of fiscal discipline and deficit, and it would be difficult for Government to release funds now for general elections to the provincial assemblies of Punjab, Khyber-Pakhtunkhwa and later for General Elections to National Assembly, provincial assemblies of Sindh and Balochistan,” according to the ECP order.

The ECP further stated that the federal government has conveyed that due to the critical economic situation of the country, it will be very difficult to provide funds for the elections at the moment and additional funds for the staggered elections.

According to the details, the additional cost of segregated elections is Rs9.3 billion.

The federal cabinet revised the budget estimates last month to Rs11.2 trillion, a Rs1.3 trillion or 17% increase over the budget passed just eight months ago.

The government has also reduced the estimate of provincial surpluses to Rs559 billion from Rs750 billion in the budget. As a result, the total deficit is expected to be Rs5.7 trillion, or 6.8% of GDP.

For programme purposes, the government has set the primary deficit target at Rs465 billion, or 0.5% of GDP, up from the previous surplus target of Rs153 billion.

This month, Prime Minister Shehbaz Sharif also announced Rs73 billion in free wheat flour schemes in two provinces where elections are due but have been postponed under the Constitution.

The cost of these schemes, which are funded by provincial governments, is nearly three times that of holding elections in two provinces.

The Rs73 billion spent on wheat flour subsidies may jeopardise the recently agreed fiscal framework with the IMF, which calls for provincial cash surpluses of Rs559 billion. According to the sources, K-P informed the prime minister that it did not have the entire Rs19 billion to fund the free wheat flour scheme. The province’s 5.7 million families will receive free wheat flour as part of the plan.

The IMF has refused to lend money to Pakistan’s coalition government for the second time in four days. “I want to be categorical that there is absolutely no truth to this or any insinuated link between the past and current IMF-supported programmes and the decision by the Pakistani government over its nuclear programme,” Esther Perez previously stated.

According to the IMF’s country director, programme discussions have solely focused on economic policies to solve Pakistan’s economic and balance-of-payments problems, in accordance with the IMF’s mandate to promote macroeconomic and financial stability.

Pakistan and the IMF programme remain stalled due to non-compliance with conditions relating to $6 billion in additional loans and interest rate hikes.