KP finance minister Taimur Jhagra throws spanner into IMF talks

Withdraws commitment to run a budget surplus, citing flood related costs and unresolved budgetary issues.

KARACHI: The finance minister of Khyber Pukhtunwa province has withdrawn his commitment to run a provincial surplus this fiscal year, thereby potentially jeopardizing Pakistan’s case for resumption of the IMF program days before the scheduled board meeting.

A copy of the letter is available with Profit. It is dated August 26, 2022 and addressed to federal finance minister Miftah Ismael. In it Jhagra refers to the consent he had given back in July, under authority from his Chief Minister, to run a budget surplus this fiscal year. All provinces have to agree to run a surplus which is budgeted at Rs570 billion total for FY23. As part of the IMF program, each province is expected to deliver a written commitment to abide by this budgetary requirement which they have been doing for years, ever since Pakistan has been on an IMF program.

At the time when these commitments were given in July, KP was the only province controlled by the opposition Pakistan Tehreek-e-Insaaf (PTI). Back then Jhagra had given the commitment but attached a note detailing his objections. “We did this in the greater national interest” Jhagra says in the letter, referring to his original assent to the key condition required by the IMF from all provincial governments. In withdrawing his commitment, he also says he has been “unable to get time to meet with either the Minister or the Secretary even once.”

In his latest letter withdrawing the commitment to run a surplus, Jhagra reminds the finance minister Miftah Ismael of these objections, lists them all, and concludes that “in these conditions, and without the resolution of the issues highlighted previously, for the province of Khyber Pukhtunkhwa to actually leave a surplus will be next to impossible.”

He lists 4 issues.

  1. 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.
  2. Has asks the government to commit to monthly transfers of Net Hydel Profits as per terms specified in an MoU signed between the federal and provincial governments in 2016.
  3. To revive the National Finance Commission Award immediately.
  4. “For the federal government to also commit to immediately engage and resolve other financial issues with the Government of Khyber Pukhtunkhwa”.

“We estimate the overall impact of not resolving these issues is actually to create a Rs100 billion unfunded liability” on the KP budget, the letter states. It also invokes the “monsoonal flooding that we are currently facing, that as we speak has wreaked destruction in Swat, DI Khan and Tank, but may over the course of the next few hours and day make the damage from this year’s flooding greater than the super-floods of 2010. The cost of rescue, relief, rehabilitation and building back is likely to run into the tens of billions.”

“Please note that in these conditions, and without the resolution of the issues highlighted previously, for the province of Khyber Pukhtunkhwa to actually leave a surplus will be next to impossible” it concludes.

In the budget for ongoing fiscal year, Jhagra had announced a record high development budget of Rs418 billion, a 15 percent increase in pensions of provincial government employees, and regularization of 63,000 government employees, mostly school teachers.

It is not yet clear how the letter laying out the withdrawal of the commitment to run a fiscal surplus will impact Pakistan’s case at the IMF Executive Board which is scheduled to meet on August 29, but written commitments of this budget surplus were a key requirement for approval of the program. The Board might decide to overlook the matter for now in anticipation of a political settlement. 

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Khurram Husain
The author is Editor at Profit and can be reached at [email protected]

7 COMMENTS

  1. They are not playing politics rather they are playing with the integrity of the state. No doubt that PTI is a spoiler. They are destroying the country.

  2. This is simply insane and uncalled for move by KP govt. This surely is an attempt to throw spanner in IMF deal. Its a bad news for the country’s economy, stability of PKR. Never in the past, we have observed ruthlessness and immaturity of this level as exhibited by PTI “boys” n their leader.

  3. truly disgusting move by taimur sab, obviously at the behest of the great khan. how low will they steep to bring the megalomaniac lunatic back into power! this is the true face of dirty politics which has the potential of literally destroying the country. hope Miftab sab find some way out of this. No force on earth can undo Pakistan. It is here to remain till the end of the world. its enemies, domestic and foreign, will fail every time. Long live Pakistan!

  4. Enemies of the people running KP government. People should open their eyes to see what is going on & remember their faces..

  5. The federal government’s move to roll back merger of erstwhile FATA is sinister and on behest of foreign and local political parties, resulting into cutbacks of funds. This is a good move.

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