ISLAMABAD: Pakistan’s government has asked provincial administrations to finance flood-recovery projects in line with the International Monetary Fund’s (IMF) conditions under its $8.4 billion loan programs, officials from the Sindh and Khyber Pakhtunkhwa provinces said on Tuesday.
The move comes as an IMF mission led by its chief Iva Petrova is in Islamabad for talks on the second review under a $7 billion Extended Fund Facility (EFF) and the first under a $1.4 billion Resilience and Sustainability Facility (RSF). A successful review could unlock about $1 billion in budgetary support and $100 million for climate-resilience funding from the lender.
Prime Minister Shehbaz Sharif has said the recent flood damages should be taken into account and “factored in” as the IMF assesses Pakistan’s fiscal performance, arguing that the scale of the disaster underscores the need for flexibility in the review process. The floods have killed more than 1,000 people and destroyed crops and infrastructure worth around $1.3 billion, according to initial government estimates.
The IMF has long urged Pakistan to improve coordination between federal and provincial governments on natural-disaster response and financing — a measure that officials say has prompted Islamabad to ask provinces to fund part of the country’s flood-recovery program. Provincial governments, however, say the move shifts the burden of a national disaster onto their already stretched budgets.
“The federal government has asked provinces to fund flood recovery schemes under IMF pressure,” Sharmila Farooqui, a member of Pakistan’s parliamentary finance committee from Sindh, the country’s second largest province, told Arab News.
“This is neither fair nor feasible. Provinces like Sindh, which suffered the worst devastation, cannot be expected to shoulder the cost of a national disaster from already strained budgets,” she said. “Flood recovery is a federal responsibility and must be treated as a national priority.”
Farooqui added that while Islamabad had not “formally” requested Sindh, discussions were ongoing and “the buzz is going around.” She said the federal government could not abdicate its duty by passing the burden to the provinces.
“Equity, compassion, and transparency must guide this process.”
Muzzammil Aslam, finance minister of Khyber Pakhtunkhwa, also confirmed that the federal government wanted provinces to fund flood-recovery projects.
“Yes, it’s partly true,” Aslam told Arab News in a text message. “We, KP, actually endorsed this from day one.”
“On IMF targets, it’s conditional on the Federal Board of Revenue’s tax collections and timely payments of straight transfers,” he said.
Both Aslam and Farooqui criticized delays in the transfer of federal revenue shares to provinces under Pakistan’s fiscal distribution system, known as the National Finance Commission (NFC) award.
“They always do. Same situation every year,” said Farooqui, who is from Sindh, Pakistan’s second-largest province, which contributes more than 60 percent of federal revenues.
She said the delay in federal transfers was a routine occurrence.
“While I was in Sindh as a provincial lawmaker, we would raise this issue every year during the budget. A major portion is always delayed.”
Pakistan remains highly exposed to extreme weather events that pose major fiscal and development risks for its cash-strapped economy. The IMF’s RSF loan is designed to help buffer the nation from climate-related growth and balance-of-payments shocks.
“(The RSF) aims to reduce Pakistan’s balance-of-payments stability risks stemming from climate vulnerabilities,” the IMF said in its latest review report.
Government estimates show the latest floods have damaged crops and infrastructure worth about $1.3 billion, mostly in the country’s breadbasket Punjab province.
