Status of Implementation of the IMF Program Management of Expenditures One of the key targets in the Program is a 50 percent reduction in the outlay on subsidies by the federal government. However, in the first quarter of 2022-23 the payment of subsidies has actually increased by 26 percent. Monetary Policies An explicit commitment has been made for operation of a market-determined exchange rate policy. Instead, the SBP has opted to manage the demand for dollars by administrative control over import LCs. This is a blatant violation and on inappropriate step. There is need to revert to a market-based exchange rate policy and close the gap between the inter-bank rate and the open market rate, which has led to a diversion of flows of remittances and exports into the hawala market. The policy rate remained at 15 percent in the first quarter of 2022-23. However, it has recently been raised to 16 percent. The good news is that Pakistan has successfully exited from the FATF Grey List and all concessional refinancing schemes have been withdrawn by the SBP. Regarding the SOEs there continues to be little progress. The full increase in electricity and gas tariffs is yet to take place. The SOE’s Law has been passed, but there is no progress in the process of privatization. Overall, progress on implementation of agreed reforms has been limited and piecemeal in character. The reluctance of the IMF to finalize the 9 th review is understandable in the absence of implementation of key reforms which are clearly in the national interest. 7.3 Meeting the Performance Criteria Various targets in the form of performance criteria have been set for the end of each quarterly review. Fortunately, this is one area of success. Many of the performance criteria have been met as shown in Chart 7.2. Three important criteria and indicative targets that have not been met are as follows: FIRST Ceiling on SBP SWAPS SECOND Ceiling on Accumulation of Tax Arrears THIRD Ceiling on Power Sector Payment Arrears Overall, the performance in the first quarter is mixed. The weakest area is fiscal policy and additional taxation will have to be resorted to and the subsidy bill reduced in a big way. The physical control over import LCs will have to be withdrawn and a full transition 87