Clarification - Response on News Item Published in "Express Tribune" regarding TSA

A news story has been published in the national newspaper (The Express Tribune) on 10-12-2022 with the title "TSA deadline will be missed: IMF". The story has been based on a draft report prepared by the IMF Technical Assistance Mission which visited Islamabad from October 3rd to 10th 2022.The news story contains incorrect data, wrong and baseless information and mis-interpretation of the facts and records.

It is clarified that Finance Division with the technical support of the International Development Partners including IMF has undertaken significant structural reforms in the field of the public financial management in the Federal Government. Implementation of Treasury Single Account (TSA) is one of such reform areas where the IMF has been providing comprehensive Technical Assistance for capacity building, design, scope and execution in line with the International Best Practices. It is also highlighted that the subject newspaper story is based on an IMF report which is still at the draft stage and discussions are in progress between Finance Division and the IMF. The IMF draft report has acknowledged major strides made by Government of Pakistan in implementation of challenging public financial management reforms including TSA. This aspect has been conveniently ignored in the news story.

Owing to the complexities involved in the implementation process, the IMF team has proposed various models and timelines for TSA. Finance Division is in the process of evaluating these proposed models and timelines in consultation with all stakeholders.

While the Government has agreed with the IMF to implement TSA, there is no end-December 2022 deadline to close all commercial bank accounts maintained by public sector entities and Ministry of Defence and transfer money to the State Bank of Pakistan. Further, no commitment has ever been by Government of Pakistan with IMF to close all commercial bank accounts maintained by the Public Sector Entities including OGRA and NHA. The figure of cumulative balance of about Rs. 2.9 trillion is also incorrect.

The statement that “Ministry of Finance is un-aware of the ownership of 484 bank accounts” is also in-correct and tantamount to dis-information. Complete information is available with the State Bank of Pakistan with regard to all the commercial bank accounts maintained by the federal as well as provincial government entities/organizations. The commercial banks have been sharing full data with the SBP as per the provisions of the PFM Act, 2019.

The implementation of TSA in all the Public Entities of the Federal Government is an ongoing process involving extensive consultations on scope, design, accounting, banking arrangements and IT infrastructure. It has not been slowed down as alleged in the news story.

Rebuttal - A false message on supposed economic emergency proposals has been circulating on the social media

A false message on supposed economic emergency proposals has been circulating on the social media in recent days.

Finance Division not only strongly rebuts the assertions made in the said message but also categorically denies it and that there is no planning to impose economic emergency. The message is unfortunately aimed at creating uncertainty about the economic situation in the country and can only spread by those who donot want to see Pakistan prosper.

Creation and spread of such false messages is against national interest in these times of economic hardship. A mere reading of the nine points mentioned in the message indicates how far-fetched those suggestions are. It is also quite inappropriate to equate Pakistan with Sri Lanka, given inherent strength and diversity in Pakistan’s economy.

The present difficult economic situation is mainly the result of exogenous factors like commodity super-cycle, Russia-Ukraine war, global recession, trade headwinds, Fed’s increase in policy rates and devastation wreaked by unprecedented floods.

The Government has been making utmost efforts to minimize the impact of such external factors, even when faced with the economic consequences of unprecedented floods and having to meet IMF conditionalities. The Government remains committed to completing the IMF program while meeting all external debt repayments on time.

In this challenging economic situation, the Government has put in place a number of austerity measures with the approval of the Federal Cabinet. Such measures are in public knowledge and are aimed at eliminating non-essential expenditures. Similarly, the Government has been deliberating energy conservation mainly aimed at reducing the import bill. Such deliberations will continue in the Cabinet and all decisions will be taken in consultation will all stakeholders and in the best national interest.

With the efforts of the current government, the IMF program has come back on track and negotiations leading to 9th Review are now at an advanced stage. Government’s recent efforts have resulted, amongst others, in lower current account deficits in recent months and achievement of FBR revenue targets. Easing up of pressure on external account is also foreseen in the near future. While there remains the need to make structural adjustments in the mid-term, the economic situation of the country is now moving towards stability.

Finance Division urges the people of Pakistan to contribute towards economic betterment and stability and not to pay heed to malicious rumors mongering which is against the national interest of Pakistan.

Clarification - Article titled "Financial emergency" by Dr Farrukh Saleem published in daily "THE NEWS" exaggerates the economic challenges facing the country

The article titled “Financial emergency” by Dr Farrukh Saleem published in daily “THE NEWS” today exaggerates the economic challenges facing the country while downplaying its economic strengths. The author has made use of selected data of various economic indicators to fit his views and opinions.

 In particular, the article presents a less-informed, lopsided and over exaggerated picture of external sector challenges, while ignoring that many emerging market economies are also facing similar challenges. Globally, increase in commodity prices and a strengthened US dollar has increased pressures on external sector, which the author has not alluded to in his opinion.

 The author has conveniently used a mix of latest and slightly old data to make his points.  For instance, the latest SBP’s foreign exchange reserve numbers ($8.3 bn) are mentioned followed by mentioning of import numbers in a causal manner. The deceleration in imports in the recent months has been completely disregarded.

 Similarly, current account deficit number of $17 bn (for FY22) is used to highlight the need for financial flows without mentioning that the same for FY23 is projected at around $9-10 bn by both domestic analysts as well as IFIs, something which would reduce gross financial requirement by over $7 bn.

 The article also presents only the outflow side of the external accounts (import payments, debt obligations etc.) while conveniently ignoring altogether, the upbeat exports growth, strong remittance inflows, foreign investments, and inflows anticipated in FY23. It is to be noted that Pakistan’s exports and foreign remittances are in excess of $ 60 bn per annum.

 Pakistan has successfully completed 7th and 8th review of the IMF’s Extended Fund Facility in early September 2022. This signifies confidence in the government’s resolve and policy initiatives to combat the external sector challenges. Foreign exchange inflows anticipated later in FY23 in accordance with the IMF program, moderation in significant export and remittance inflows will soon subside the external sector pressures.

 The government is confident that Pakistan is in a position to not only meet its financing requirements but also rebuild its forex reserves to more than 2 months of imports over the next few months.

 Finally, the government is also committed to follow a strict fiscal discipline and the fiscal deficit for FY23 is also projected to remain below Rs 5 trillion even in the aftermath of economic challenges posed by the devastating floods. The articles tries to create an unwarranted alarm by claiming that the fiscal deficit will be Rs 6 trillion.

Clarification - News circulating on social media that Government has borrowed from State Bank of Pakistan (SBP)

A news is circulating on social media whereby an impression is being created that Government has borrowed from State Bank of Pakistan (SBP) which is grossly incorrect and depicts the limited understanding of the monetary variables. As reported in the monetary tables (M2), the government’s borrowing from the SBP for budgetary purposes is calculated as the difference between the government’s stock of borrowing from the SBP and its deposits with the SBP. Therefore, net borrowing number may change due to fluctuation in cash balance with SBP and other accounting conventions. This change is not fresh budgetary borrowing by the government from SBP but just a change in government’s cash balance with the SBP.

Government remains committed to complying with its obligations under the amended SBP Act and IMF program conditions. There has been no fresh borrowings by the government from the SBP. In fact the government has been retiring its previous stock of debt with the SBP on its maturity.