Technical level discussions began on July 29, 2015 with a Staff Level Mission of the Fund to be followed by three-day policy-level talks prior to the conclusion of the review on August 6, 2015, said an official of Finance Ministry. Secretary Finance Dr Waqar Masood maintained that discussions on the review would be held on the agreed performance criteria and are unlikely to be an issue.
However, an official on condition of anonymity said there is a possibility that Pakistan may seek a waiver in terms of fiscal deficit for fiscal year 2014-15 expected to be higher than the target. The agreed Federal Board of Revenue (FBR) target of Rs 2691 billion was missed by a wide margin of over Rs 103 billion with collections of Rs 2588 billion for the just concluded fiscal year.
Sources said the government is expected to face some tough questions on its failure to complete the privatisation process of Heavy Electric Complex and National Power Construction Company (NPCC). The IMF had expressed concern by pointing out in its report released after the conclusion of discussions on seventh review that gas price notifications, which are normally done on a bi-annual basis in January and July of every year, have been postponed since 2014 due to political protests. To allay Fund concerns, Minister for Petroleum and Secretary Petroleum committed to increasing gas prices by around 20 per cent from August 1, 2015 - days before the talks between the two sides began on the eighth review.
Sources said that power sector and broadening of tax base are expected to dominate discussions given poor government performance with respect to continued heavy reliance on tariff increase (instead of fixing structural issues in energy sector) and further burdening the existing tax payers (instead of broadening the tax base). An official said recent increase in electricity tariff after imposition of three surcharges in tariff would worsen the problem instead of resolving it as an increase in tariff would lead to further widening of the gap between billed amount and recovery.
The stock of power sector payables according to the IMF report reached Rs 615 billion by end-March 2015. Payables comprise circular debt (PRs 280 billion payable toward power sector entities) and the stock of arrears covered by the Power Sector Holding Company Limited (PHCL) was estimated at PRs 335 billion.