Stressing the importance of the implementation of the Treasury Single Account (TSA)-1, the International Monetary Fund (IMF) has placed a condition on Pakistan to close all the bank accounts of public sector entities and the defence ministry in private commercial banks, it emerged on Monday.
According to local media reports, the Fund has demanded that a framework to be put in place by December this year for this purpose with the money transferred to the State Bank of Pakistan’s (SBP) account whereas the Ministry of Finance has asked for at least two years for making the TSA-1 fully functional.
It may be recalled that Pakistan already agreed to withdraw Rs2,900 billion from commercial banks and shift it into the account number of the federal government with the central bank, known as the Federal Consolidated Fund (FCA), in a bid to close commercial bank accounts that are funded through government money.
The IMF, however, insists on a framework to be put in place by December this year.
The minister for finance was expected to establish and make functional the TSA-1 under the structural benchmark for May 2021 under the existing $6 billion Extended Fund Facility (EFF). However, the all-powerful ministries, including the Ministry of Defense and others, did not yet accomplished such assigned tasks within the stipulated time-frame.
It is pertinent to mention here that the Fund’s demand is aimed at bringing back hundreds of billions of rupees under the government’s control that are currently placed with the commercial banks in violation of various instructions by the finance ministry.
According to a report by The Express Tribune, till June last year, there were about Rs500 billion deposits in various accounts of the armed forces that had now grown close to Rs600 billion.
Under the first phase, the commercial bank accounts of the government ministries and attached departments had to be closed by May 2021. However, only 4,500 of the 6,000 of these accounts could be closed whereas a balance of about Rs5 billion was transferred to the central bank.
According to a report by The News, private banks hold at least Rs1,665 billion which belongs to different federal ministries and divisions while over Rs1,100 billion has been identified to be of provincial governments.
Furthermore, media reports have claimed that the delay in reaching a staff-level agreement was the IMF’s insistence to roll out the TSA-2 system within the current fiscal year (FY22).
Under the TSA-2, the Fund is asking the attached departments of ministries such as NHA, OGDCL, FWO, NLC, SCO and others to follow the same rules and shift their deposits into consolidated accounts.
Moreover, the global lender also wants the government to introduce a finance bill in parliament to withdraw tax exemptions and slap more taxes.
Pakistan has remained unsuccessful in its third attempt to conclude the 6th review talks with the IMF that originally began in June this year, which means that the completion of the 7th review that was to begin from September 3 and December 8 this year, would be delayed.
