At a parliamentary hearing on Tuesday, authorities acknowledged that Pakistan still faced a number of economic challenges, including power sector losses.

However, they said the country was not in as deep a crisis as it was in 2008 when it had to turn to International Monetary Fund for a bailout.

They also hinted at entering a new IMF programme at a later stage this year. Finance Secretary Dr Waqar Masood said the IMF mission would be visiting Islamabad in the first half of next month for Article-IV consultation because Pakistan still needed its advice and guidance.

He said that during these consultations the two sides would deliberate on the type of relationship Pakistan should have with the IMF. He said a wide-ranging seminar with the IMF would be organised just before formal talks next month to which all parties would be invited to give their input.

As Mr Masood tried to allay lawmakers’ fears over threats to fiscal and macroeconomic framework in the aftermath of the unsuccessful and incomplete conclusion of the IMF programme on Sept 30, most of the senators attending the meeting of the Senate Standing Committee on Finance believed that key elements of external account were based on a weak footing and evaporated foreign exchange reserves as bulky external repayments became due shortly.

They said expected inflows on account of PTCL sale proceeds, disbursements by the United States, revenue generation through the sale of next generation telecom licences, floating of bonds in the international capital market and inflows from multilaterals in the absence of IMF programme were unrealistic and the government should immediately start working on a plan-B to avert a crisis-like situation sometime this year.

Former finance minister Senator Ishaq Dar called for a strong government position on reimbursement of Coalition Support Fund (CSF) by the United States against services provided by Islamabad to coalition forces as the finance secretary informed the panel that CSF arrears had touched $2.5 billion as the US stopped payments after the May incident in Abbotabad.

Dr Khan said the US did not reimburse anything after it paid $700 million in December last year, although US authorities had given positive signals about the CSF payments without committing any timeline.

The senators also questioned non-payment of over $800 million by the UAE’s Etisalat on account of PTCL sale proceeds and raised doubts over realisation of Rs75 billion anticipated in the budget through the sale of third generation telecom licences.

Senator Dar said the government should not overlook the UAE’s concerns and address their genuine complaints.

Dr Waqar said he, along with the interior minister, had just returned from Dubai after negotiations on PTCL issue and reported a “significant progress expected during the current year”.

Dr Waqar Masood said the external sector performed exceptionally well during the last year as exports increased by a record 30 per cent to $25 billion and remittances surged by a record 24 per cent to $11.2 billion despite no inflows from the IMF and only $400 million disbursed by the Asian Development Bank and the World Bank in the last quarter of the year. As a result, the foreign exchange reserves increased to a record $18.3 billion at the end of June 30, 2011, against $16.7 billion a year before.

He said the power sector, which consumed Rs395 billion worth of subsidies last year, continued to be a major challenge despite the fact that tariff differential subsidy had completely been cleared, but about Rs300 billion worth of current circular debt was emanating from system losses, non-recovery of bills from the private sector, non-payment of arrears by the public sector, particularly provincial governments and sales tax payments on un-recovered bills.