Impact of IMF Targets and Conditionalities on the Economy Management of Expenditures: Seven action areas have been identified as shown in Chart 5.2 mostly from the viewpoint of improving the system of public financial and debt management. Also, a Medium-Term Budget Strategy is to be prepared. The objective is to adhere to the provisions in the Fiscal Responsibility and Debt Limitation Act of 2005. Chart 5.2: Management of Expenditures ACTION/ REFORM • Limiting Power Subsidies to Rs 570 billion, of which Rs 225 billion will be the tariff differential subsidy. Among actions to improve management of the sector, the Quarterly Price Increase in tariffs in 2022-23 will have to aggregate to Rs 7.90 per kwh • Signing Memorandum with Provincial Governments to generate a cash surplus of Rs 750 billion • Limiting Guarantees to State-Owned Enterprises and ensuring that loans to the SOEs remain on modest downward trajectory with respect to the GDP • Public Financial Management Reform, including full operationalization of the Treasury Single Account(TSA) by December 2022 • Updating and Implementing Medium-Term Budget Strategy to achieve reduction in the public debt to GDP ratio • Devising new Debt Instruments, focusing especially on Shariah compliant Bonds • Establishing a Debt Management Office by December 2022 IMPACT • One of the most critical areas for success of the Program in 2022-23. The power subsidy is to be reduced from the peak level of Rs 1072 billion in 2021-22 The hike in power tariff will be 40% on average • The target surplus was Rs 570 billion in 2021­22, but the actual surplus was Rs 351 billion. More than doubling of the cash surplus in 2022-23 is a very ambitious target • The credit to SOEs stood at Rs 1340 billion at end of 2021-22, equivalent to 2% of the GDP. The contingent liabilities cost the Government Rs 269 billion in 2021-22 and are budgeted at Rs 291 billion in 2022-23 In the presence of significant cost-push inflation, losses of SOEs could be much higher and require more support • Progress already made. The issue is the merger of defense services accounts into the TSA. • MTBS prepared and released by the MOF for 2022-23 to 2024-25, with the objective of reducing the public debt to GDP ratio by 2 percentage points each year In progress 63