ISLAMABAD, Nov 8: The International Monetary Fund has expressed satisfaction over Pakistan`s economic progress and says budget deficit is broadly satisfactory and the government borrowing has been within the target.

Addressing a press conference along with Finance Minister Ishaq Dar here on Friday, the chief of the visiting IMF mission, Jeffery Franks, lauded the government`s performance and said various indicators were positive and even better than what had been agreed with the IMF.

Pakistan and the IMF successfully concluded the 10day first quarterly review under the there-year $6.6 billion Extended Fund Facility (EFF).

`The government has beenin power for a few months only and they are beginning to work on the restructuring programme to improve the performance of Gencos (generation companies) and Discos (distribution companies) and a lot have been done. But they need to be given time,` Mr Franks added.

He said the government had reduced subsidy on electricity without increasing burden on the lowest level of power consumers.

Mr Franks said the two sides had completed the first review of the EFF lending programme and the mission had made upward revision of the GDP projection to 2.7 per cent from 2.5pc for the current fiscal year because of improved performance of theeconomy. But, he added, the situation on the balance of payment was very difficult and the State Bank of Pakistan needed to build foreign exchange reserves.

`Going forward, challenges on the balance of payments will persist for some time to come, so it`s crucial that firm action be taken to rebuild foreign exchange reserves,` he added.

Mr Franks said the mission saw satisfactory reforms on the energy side and the government had been broadly on track. The mission report will be presented to the IMF board scheduled to meet in the third week of December.

It will pave way for the release of second tranche of $587 million.

Finance Minister Dar said that different benchmarks were on track and the IMF mission was satisfied with the government`s performance.

He said there were good news form other lending agencies too. `During my visit to Washington, Opec increased credit line for Pakistan to $1.5 billion from $500 million and the government is negotiating with the World Bank for $1.7bn $700m for Dasu Dam,` he said, adding that work on the dam would start in three to four months. The minister said the dam would produce 3500 to 4000MW and help increase power generation to 21,000MW over the next three to four years. `We have even decided to start work on Diamer-Basha Dam from our own resources.

Mr Dar said growth, revenue collection, manufacturing and budget deficit targets had been achieved whereas current account deficit was slightly above the target because of the delay in flows of the Coalition Support Fund and other external loans.

The minister said the government was trying to be within budgeted subsidy after the clearance of Rs480bn circular debt and rejected media reports about its resurge. `We need massive restructuring of the power sector.He hinted at withdrawing subsidies given to captive plants and industries and said: `Some people are making billions on subsidies destined for the masses.

He said the government had earmarked Rs250 billion on account of tariff differential for the power sector for the current fiscal year and would ensure that this amount did not exceed. `We need to get away from this routine and the mid-term plan of 8-10 years formulated by the government would result in generating 40,000MW,` he said. `We want to have surplus power and that too from cheap sources like coal, solar, wind etc.

The minister said the IMF mission had been informed that the government was moving forward with privatisation or restructuring of 31 public sector enterprises to improve public sector resource allocation and limit poor performance.

`We cannot afford to pay Rs450bn in loss every year but we will protect workers, Mr Dar who heads the cabinet committee on privatisation said.

`PIA is at the top of the agenda, followed by electricity generation and distribution companies,` he said, adding that listed energy sector companies like OGDCL and gas utilities were not in the list.

Anwar Iqbal adds fromWashington: A statement issued by the IMF said its mission staff would prepare a report for the IMF Executive Board on the first review under the EFF. Upon approval, SDR 360 million (about US$550 million) would be made available to Pakistan.

The loan followed an assessment by the Asian Development Bank that Pakistan needs $6bn to $9bn to meet its obligations, including about $5bn in outstanding debt on an earlier $11bn IMF loan package.

Pakistan averted a balance of payments crisis in 2008 by securing the $11bn IMF loan.

This was suspended two years ago after economic and reform targets were missed.

The IMF team which visited Islamabad reached stafflevel understanding with the authorities on a set of economic policies detailed in an updated letter of intent for the loan package. Their discussions focused on the main issues ahead, and the policies needed to build the suggested macroeconomic stability as the basis for shoring up confidence and boosting economic growth.

`While economic conditions remain challenging, with pressure on balance of payments, growth prospects are somewhat better than previously envisaged,` said the statement.