ISLAMABAD: The International Monetary Fund has set four pre-conditions for continuing with Pakistan ‘s $11.3 billion standby arrangement (SBA) and withheld the release of two remaining tranches of $2.6 billion till the government meets the criteria, official sources said here Thursday.

The IMF’s review, which was due in June this year, should have been followed by the release of a $1.3 billion tranche in July. The government did not meet the performance criteria set for the quarter (April-June 2010) and the review had to be delayed. It finally took place in Washington last month.

Under the original plan, the entire $11.3 billion loan under the SBA should have been completed before the end of this year.

However, non-fulfilment of the performance criteria by the government on account of continuous breach of fiscal deficit limits for three quarters, non-implementation of value-added/reformed general sales tax with effect from July 1 and slower progress on the energy sector reforms has led to the stoppage of two tranches of $2.6 billion.

Official sources said that during the recent talks in Washington , the IMF authorities had taken a very strong position and informed Pakistani officials that the programme would continue only after key measures agreed under the programme were adhered to. The IMF has so far released $8.7 billion out of the $11.3 billion package.

In view of special circumstances arising out of the devastation caused by floods, the IMF, however, asked Pakistan to avail $450 million reserved for natural emergencies.

An official said Pakistan could have secured the emergency support through a simple letter, instead of spending a lot of time, energy and resources in the United States .

He said the IMF had made it very clear that further talks on macroeconomic review and the release of remaining $2.6 billion could be held only after the government introduced reformed general sales tax or value added tax next month, as announced earlier.

Internews