INTERNATIONAL MONETARY FUNDPAKISTAN
Third Review under the Stand-By Arrangement
Prepared by the Middle East and Central Asia Department(In consultation with other departments)Approved by Juan Carlos Di Tata and Michele ShannonDecember 14, 2009
Discussions were held during November 2–12, 2009 in Dubai
Staff met with Finance Minister Tarin, State Bank of Pakistan Governor Raza, Finance Secretary Siddique, and other senior officials. The IMF team consisted of Messrs. Mazarei (Head), Wieczorek, Kock, and Piazza (allMCD), Mr. Jonas (FAD), Mr. Sun (SPR), and Mr. Ross (resident representative in Pakistan).Ms. Kahkonen (World Bank) and Mr. Parvez (Asian Development Bank) participated in thediscussions on structural issues. Mr. Ahmad (OED) also participated in the discussions.
The SBA in the amount of SDR 5.169 billion (about $7.6 billion, or 500 percent of quota) wasapproved by the Executive Board on November 24, 2008
. The SBA was augmented toSDR 7,235.9 million ($11,327 million, or 700 percent of quota) and extended through the end of 2010 on August 7, 2009. The latest, third disbursement of SDR 766.7 million ($1,200 million)was made on August 7, 2009, after completion of the second program review. Of this amount,SDR 475.6 million ($745 million) was made available for budget financing. Disbursementsunder the program thus far amount to SDR 3,402.6 million ($5,327 million).
In the attached Letter of Intent, the authorities request completion of the third review under the SBA
Completion of the review will enable the fourth disbursement under the program inthe amount of SDR 766.7 million. Of this amount, SDR 237.75 million (about $380 million)will be made available for budget financing.
Program implementation has been uneven but key reforms are moving forward
. All end-September quantitative performance criteria were met, with the exception of the ceiling on theoverall budget deficit, which was missed by a margin of 0.3 percent of GDP due to a shortfallin external grants and nontax receipts from reimbursement of military outlays, lower taxrevenue as the deadline for the advanced income tax payment was moved from September 15to October 15, and a spending overrun owing to higher military outlays and the advanced payment of October wages ahead of Ramadan. The tax revenue foregone in September waslargely recovered in October, and the wage bill overrun was self-correcting. On these grounds,the authorities request a waiver of nonobservance for the related end-September 2009 performance criterion. All structural benchmarks relevant for the completion of the thirdreview were met, albeit most of them with delays. Staff recommends the completion of the program review.