Islamabad (Commerce Desk) — The International Monetary Fund (IMF) has begun considering reducing the spending target for provincial governments in Pakistan on the health and education sectors from Rs4.2 trillion to approximately Rs3.9 trillion.
According to sources, due to the financial difficulties faced by the provinces, there are also limited chances of meeting the prescribed target during the current fiscal year. Last fiscal year, the four provinces collectively spent around Rs370 billion less on health and education than the target set by the IMF.
Federal Finance Secretary Imdadullah Bosal told a parliamentary committee last month that the IMF condition regarding health and education spending had consistently not been met during the current program.
Under the $7 billion loan program, provincial governments are required to spend more than Rs4.2 trillion collectively on health and education. However, the total amount allocated for these sectors in the provincial budgets for the current fiscal year is around Rs500 billion below the IMF target.
According to sources, the target is likely to be reduced to Rs3.9 trillion. Even in that case, however, a gap of around Rs200 billion would remain between the amounts allocated in the provincial budgets and the revised target.
Negotiations between the IMF and Pakistani authorities have entered the final stage, with discussions currently underway to finalize the draft Memorandum of Economic and Financial Policies.
If a staff-level agreement is reached, Pakistan is expected to receive $1 billion under the $7 billion program and more than $200 million under the climate financing facility.
According to sources, at one point the IMF had also indicated that it could make the condition regarding health and education spending stricter by turning it into a quantitative performance criterion. Failure to meet such a condition would require a waiver from the IMF Executive Board.
Sources said Sindh and Punjab have informed the IMF about severe financial pressure on their budgets, while Khyber Pakhtunkhwa has not promised to provide a cash grant to the federal government, although it has assured that the targets for health and education spending will be met.
According to Finance Secretary Imdadullah Bosal, the federal government asked the provinces to limit their expenditures because the Federal Board of Revenue’s tax collection targets were not being met, which also affected the target for health and education spending.
During the current fiscal year, Punjab has allocated around Rs3.1 trillion for health and education out of its total budget of Rs9.5 trillion. Sindh has allocated around Rs1.1 trillion for both sectors, Khyber Pakhtunkhwa more than Rs800 billion, and Balochistan Rs268 billion.