IMF Considers Cutting Health and Education Spending Target for Pakistan
ISLAMABAD: The International Monetary Fund (IMF) is considering reducing the target for provincial spending on health and education in Pakistan from Rs4.2 trillion to around Rs3.9 trillion, as negotiations between the IMF and Pakistani authorities have entered their final stage.
Sources said provincial governments were facing financial pressures, making it unlikely that the existing spending target would be achieved during the current fiscal year.
Last fiscal year, the combined expenditure of all four provinces on health and education remained around Rs370 billion below the target set by the IMF.
Federal Finance Secretary Imdadullah Bosal told a parliamentary committee last month that the IMF condition relating to health and education spending had consistently not been met during the ongoing programme.
Under the $7 billion IMF loan programme, 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.
The target is expected to be revised down to Rs3.9 trillion. Even after the proposed reduction, however, a gap of around Rs200 billion would remain between the budget allocations and the revised target.
Negotiations between the IMF and Pakistani authorities are now in the final phase, with discussions underway to finalise the draft of the Memorandum of Economic and Financial Policies (MEFP).
If a staff-level agreement is reached, Pakistan is expected to receive $1 billion under the $7 billion programme, along with more than $200 million under the Resilience and Sustainability Facility for climate financing.
According to sources, the IMF had at one stage indicated that it could make the health and education spending condition stricter by turning it into a quantitative performance criterion. Failure to meet such a condition would require Pakistan to seek a waiver from the IMF Executive Board.
Sources said Sindh and Punjab had informed the IMF that their budgets were already under severe pressure. Khyber Pakhtunkhwa, meanwhile, which has not yet committed to providing a cash grant to the federal government, assured the IMF that it would meet the targets for health and education spending.
According to Finance Secretary Bosal, the federal government had asked the provinces to limit expenditures after the Federal Board of Revenue (FBR) failed to meet its tax collection targets, which subsequently affected spending on health and education.
For the current fiscal year, Punjab has allocated around Rs1.3 trillion for health and education out of its total provincial budget of Rs5.9 trillion. Sindh has allocated approximately Rs1.1 trillion for the two sectors, while Khyber Pakhtunkhwa has earmarked more than Rs800 billion and Balochistan Rs268 billion.
