ISLAMABAD - The International Monetary Fund (IMF) Executive Board will meet on Monday (tomorrow), which would decide the fate of budgetary assistance from bilateral or multilateral sources for Pakistan.

The IMF board will consider Pakistan's first post-programme monitoring report. An IMF staff mission, led by Harald Finger, visited Islamabad from December 5 to 14, 2017 for the first post-programme monitoring discussions since the end of $6.64 billion External Fund Facility (EFF) in September 2016.

The government believes that IMF board would show satisfaction over the economic situation of the country, which would pave way for other bilateral or multilateral sources to release budgetary assistance for Pakistan. The government needs foreign inflows desperately to finance its current account deficit.

At the conclusion of the visit, the IMF officials had stated that Pakistan should focus on two pillars of economy - tightening of fiscal deficit and external side - by addressing the loss of foreign exchange reserves.

The ministry of finance recently informed a parliamentary committee that Pakistan current account deficit would touch $16 billion during ongoing fiscal year. The current account deficit is under pressure due to massive increase in imports as against exports. The State Bank of Pakistan has projected that exports will touch $24 billion mark and the imports will be touching $54 billion mark in fiscal year 2018. The government stated that $7 billion current account deficit is feared in the next five months in addition to $2.5 billion debt servicing liability by June 2018. Therefore, the government would borrow around $7 billion before June this year. However, all these borrowings depend on the IMF’s report.

Meanwhile, the country’s foreign exchange reserves are already under pressure during ongoing fiscal year due to the widening current account deficit and repayment of previous loans. The foreign exchange reserves held by the State Bank of Pakistan had come down to $12.3 billion despite the fact that government had raised $2.5 billion through the auction of Euro and Sukuk bonds in November last year. The total reserves of the country including of commercial banks are recorded at $18.4 billion on February 23 this year.

Pakistan and the IMF staff have revised macroeconomic projections for the current fiscal year. Pakistan and IMF agreed to keep budget deficit projection at over 5 percent of GDP for the current fiscal year of 2017/18 as against the target of 4.1 percent. Pakistan’s budget deficit was recorded at Rs796.3 billion (2.2 percent of the GDP) during first half (July-December) of the current fiscal year. The government is hoping to restrict the deficit at below 5 percent of the GDP as the tax collection of the Federal Board of Revenue is impressive that had recorded around 17 percent growth during first eight months of the current financial year.

It is worth mentioning her that the visiting IMF had prepared its preliminary report on Pakistan’s economy, which would presented in Executive Board meeting for approval.

 

 

IMRAN ALI KUNDI