Punjab Misses Cash Surplus Requirement Putting IMF Deal At Risk

Pakistan has fallen short of a critical demand of the International Monetary Fund (IMF) after failing to meet the required Rs. 342 billion cash surplus requirement from its provincial governments due to a shortfall in Punjab’s contribution in the first quarter of the ongoing fiscal year. The combined provincial surplus was Rs. 160 billion, a shortfall of 53 percent Rs. 182 billion, according to preliminary federal data. This has raised doubts over the government’s ability to comply with the terms of its $7 billion IMF Extended Fund Facility (EFF), reported Express Tribune. Under the current IMF agreement, provinces are required to generate a cash surplus of Rs. 1.217 trillion for the fiscal year, with Rs. 342 billion expected for the initial quarter. Punjab’s reduction of its commercial debt on commodities significantly impacted its surplus and pushed the cumulative figures below the IMF’s benchmark. However, the provinces did exceed their tax collection target and collected Rs. 213 billion in the July-September, which is higher than the Rs. 184 billion target set by the IMF. With spending rising by 33 percent year-on-year in the first quarter, primarily due to increased current expenditures, achieving cash surplus requirements may be difficult. The IMF’s latest staff report notes that the federal and provincial governments are aligned on fiscal strategy and should aim for increased provincial responsibility in managing expenditure and revenue collection to maintain budgetary balance.