Finance Minister Miftah Ismail (L) and Khyber Pakhtunkhwas Finance Minister Taimur Khan Jhagra. — AFP/ITDP website

IMF programme jeopardised as KP govt withdraws commitment of provincial surplus

by Pakistan News
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Finance Minister Miftah Ismail (L) and Khyber Pakhtunkhwa’s Finance Minister Taimur Khan Jhagra. — AFP/ITDP website 
  • KP’s Finance Minister Taimur Khan Jhagra’s decision puts IMF’s programme at stake. 
  • Jhagra cites several reasons for withdrawing commitment.
  • One of the reasons include flooding which has worsened KP’s situation. 

Khyber Pakhtunkhwa’s Finance Minister Taimur Khan Jhagra Friday withdrew his commitment of providing provincial surplus for this fiscal year, putting the International Monetary Fund’s (IMF) programme at stake. 

In a letter to Finance Minister Miftah Ismail, Jhagra said that the provincial government had signed a memorandum of understanding (MoU) in the “greater national interest.”

However, the KP finance minister refused to implement the IMF conditions and cited several reasons for withdrawing the commitment which includes a budget allocation for the former Federally Administered Tribal Area (FATA), commitment to monthly net hydel profits (NHP) transfers, monsoon flooding etcetera. 

1. Perhaps most importantly, to resolve the budget allocations for ex-FATA, which, in the absence of an updated NFC award, are decided at the discretion of the federal government.

  • To resolve the issue of current budget allocations for ex-FATA, which are insufficient to cover even the monthly salary costs of existing employees.
  • To finance the transfer of the Sehat Card Programme for the residents of ex-FATA, in which the federal government has chosen to unilaterally deprive the 6 million residents of ex-FATA of health insurance.
  • To ensure adequate budgeting to cater to the needs of TDPs (Temporarily Displaced Persons moved into out of districts camp because of operations against militancy).

2. To commit to monthly NHP transfers based on the MoU signed between the federal government and the Government of Khyber Pakhtunkhwa in 2016. Incidentally, this MoU was signed during the previous PML-N.

3. For the federal government to immediately revive the National Finance Commission (NFC), so that these issues can be resolved more permanently.

4. For the federal government to also commit to immediately engage and resolve other financial issues with the Government of Khyber Pakhtunkhwa. These include but are not limited to; clearing outstanding liabilities to the Pakhtunkwa Pakhtunkhwa Energy Development Organisation (PEDO); resolving the issues of energy wheeling; resolving the issue of WACOG, and the availability of natural gas to the province in line with Article 158; the financing of PESCO to develop transmission and distribution infrastructure in the province; and the commitment of the federal government to not delay execution of provincially funded PESCO and TESCO projects; and not substituting the Federal Excise Duty with the Petroleum levy without provincial consent, as this amounts to unilaterally reducing the size of provincial transfers from the total quantum of federal collections.

“We estimate that the overall impact of not resolving these issues is actually to create a Rs 100 billion unfunded liability in the Khyber Pakhtunkhwa budget,” stated the letter. 

It further added that the monsoon flooding has further worsened the situation of the province and caused destruction in Swat, DI Khan and Tank. “The cost in terms of rescue, relief, rehabilitation and building back is likely to run into the tens of billions,” it stated. 

The provincial finance minister said that these conditions without the resolution make it “impossible” to leave a surplus. 

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