Status of Implementation of the IMF Program The most crucial set of numbers relate to the external balance of payments. Fortunately, there appears to be success at least in restricting the size of the current account deficit to 0.5 percent of the GDP, which is in line with the annual target deficit of 2.5 percent of the GDP. However, the net inflow into the financial account has been negative and consequently the overall position has been a balance of payments deficit of almost$2 billion, despite the inflow from the IMF of$1.2 billion during the quarter. Consequently, foreign exchange reserves are down to$7.9 billion. This again is in sharp contrast to the IMF projection that foreign exchange reserves of Pakistan will rise to a healthy$16.2 billion by end-June 2023. Overall, the macroeconomic outcomes in the first quarter of 2022-23 clearly indicate that the Program is not achieving the goal of stabilizing and strengthening the economy of Pakistan and tougher actions and reforms are required. This tendency has been further confirmed by developments in the months of October and November 2022. The most important manifestation of failure is the inability of Pakistan to attract large external inflows of assistance despite the umbrella of an operational IMF Program. The actual inflow is$4.3 billion in the first four months of 2022-23. This is only 19 percent of the targeted inflow of$22.8 billion in the year. Inflows by flotation of Euro/Sukuk bonds and by borrowings from international commercial banks have been near zero. 7.2 Progress on Implementation of Reforms The fifth chapter had highlighted the actions and reforms committed by the Government in the Memorandum of Economic and Financial Policies. The actions taken in the first quarter or not yet in response to these commitments are listed in Chart 7.1. Tax Policy The petroleum levy on motor spirit has been raised to the maximum targeted level of Rs 50 per litre. The expectation is that this will also be case with HSD oil by March 2023. The fundamental reform involving the harmonization of the provincial sales tax on services with the federal sales tax on goods has made little progress. There is no agreement yet even on the classification of goods and services and on the need to avoid the levy of the federal excise duty on services. There has also been a shortfall in FBR and petroleum levy revenues in the first five months of 2022-23. There is a contingency provision in the Program whereby in the event of a shortfall the sales tax on petroleum products will be restored. Fortunately, the international price of crude oil has fallen recently by 30 percent compared to the level at the time 85