A team of International Monetary Fund (IMF) arrived in Islamabad on Monday on a five-day visit to discuss the ongoing programme with Pakistan’s economic team.
The IMF’s director of the Middle East and Central Asia, Jihad Azour is heading the delegation. Pakistan and IMF would discuss the ongoing loan programme, which was approved in July this year. The IMF had so far released around one billion dollars for Pakistan under $6 billion Extended Fund Facility (EFF).
The IMF’s review was expected to take place in November but the decision of dispatching this technical mission suggests that the IMF is not happy with massive slippages on fiscal front.
An official of the ministry of finance informed The Nation that Pakistan would brief the Fund about its plan to control the budget deficit and tax collection. The IMF team is likely to suggest ways and means to curtail the yawning budget deficit. The country’s budget deficit had ballooned to 8.9 percent of Gross Domestic Product (GDP) in last fiscal year against revised target of 7.2 percent of GDP.
The Fund would also review the tax collection efforts of Federal Board of Revenue (FBR), which had faced shortfall of Rs68 billion in first two months (July and August) of the current fiscal year. FBR has provisionally collected Rs576 billion in first two months of the fiscal year 2019-20 against the target of Rs644 billion. The IMF had set the first-quarter (Jul-Sept) revenue target at Rs1.070 trillion. Therefore, the FBR would have to collect mammoth Rs494 billion in just one month to meet the Fund’s target.
The IMF team would meet Prime Minister Imran Khan. Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh would brief the visiting delegation on the economic situation of the country. Similarly, meetings are also scheduled with Federal Minister for Economic Affairs Hammad Azhar, Federal Minister for Planning, Development and Reforms Khusro Bakhtiar and other ministers.
Last week, the IMF had stated that Pakistan needs to mobilize domestic tax revenue to fund much-needed social and development spending by keeping debt on a firm downward trend.
“And to that, I would say that one of the key elements of the program that the IMF is supporting in Pakistan, Pakistan’s program, is the need to mobilize domestic tax revenue to fund much-needed social and development spending while placing debt on a firm downward trend,” said Director IMF Communications Department, Gerry Rice during a press briefing, uploaded on IMF website.
However, Pakistan believes that structural benchmarks during first quarter of the current fiscal year are so far very encouraging with strong indication that all the targets will be met.
“The Finance ministry is fully committed along with the IMF towards the ongoing reforms program. The reforms program has 7 performance criteria, 5 indicative targets and 13 structural benchmarks and the progress on all of them is very encouraging,” the ministry recent said in its handout.
The Ministry of Finance has maintained that while targets under IMF program are ambitious, there is no need to renegotiate. Similarly, while the fiscal deficit overrun in FY19 was due to macro adjustments in the economy and the need to protect citizens from rising oil prices, it is believed that it will have a material impact on the Budget outcomes for FY20.
The payments from telecom operators and privatization of the two RLNG plants are likely to materialize in the current fiscal year and will help the government to reduce the fiscal deficit in FY20 to 7.3% of GDP. The results of the first two months are encouraging with FBR revenues posting increase of 28% y/y.
The reforms agenda pursed by the Government of Pakistan and supported by the IMF Extended Fund Facility (EFF) are target oriented but necessary to put the economy on a sustainable growth trajectory. The reforms program has 7 performance criteria, 5 indicative targets and 13 structural benchmarks.
