Pakistan successfully completes Article-IV consultations with IMF
Increase in production of commodities would have a spillover effect on services sector.
DUBAI (APP): Pakistan and International Monetary Fund (IMF) on Wednesday successfully completed annual consultations under Article IV of the Agreement.
Addressing a joint press conference along with the IMF Mission Chief Harald Finger here, Minister for Finance Ishaq Dar said the consultations had broadly covered multiple areas of the economy.
Successful completion of the discussions, he said, indicated the government’s continued commitment in further deepening of structural reforms in the areas of energy, monetary, financial and public sector enterprises.
The minister said the gross domestic product (GDP) continued to maintain its growth momentum above 4 per cent for the third successive year.
The government in the current fiscal year, he said, was expecting a growth above 5 per cent, which would be the highest in the last nine years.
“The overall economic environment is conducive backed by an accommodative monetary policy as policy rate at 5.75 percent is the lowest in last few decades,” Ishaq Dar said, adding inflation in March, 2017 slightly increased to 4.9 per cent compared to 3.9 per cent year-on-year (y-o-y) basis while during July-March FY 2017 it stood at 4.01 per cent compared to last year’s 2.64 per cent reflecting higher domestic demand and increase in global commodity prices.
Uptick in credit expansion to private sector, he said, had increased to Rs 393 billion during July-March 2016-17.
The minister said there had been a surge in import of machinery of over 42 per cent and raw materials pointing to robust industrial activities and build-up of future productive capacity of the economy.
“LSM (large scale manufacturing) continues to grow at 3.5 per cent with increase in production of cement, steel, pharmaceuticals, automobiles, paper & board and electronics,” he added.
Increase in production of commodities, he added, would have a spillover effect on services sector.
Ishaq Dar said the budget deficit, which stood at 8.2 per cent of GDP in FY 2013, had been brought down to 4.6 per cent in FY 2016.
During the current financial year (FY), it was projected to reduce to 4.1 per cent of GDP.
“We are also committed to reduce net public debt which was 60.2% at close of FY 2016 in order to lay the foundations for sustained growth,” he said, adding that in March, 2017, Federal Board of Revenue (FBR) recorded a growth of 16.1 % in revenue collection as it collected Rs 345 billion against Rs 297 billion in the corresponding month of the last year.
Thus, total collection by FBR in first nine months of the current financial year was Rs 2258 billion which was unprecedented in its history, he added.
Ishaq Dar said the shortfall in FBR’s revenue collection in the first eight months was due to pro-growth incentives offered to various sectors of the economy, particularly exports and agriculture. The major reason for revenue gap amounting to Rs 100 billion was due to not passing on the full impact of petroleum, oil and lubricants (POL) prices to the common man, he added.
He said that Pakistan had undertaken two important initiatives. First, on March 21, 2017, it signed the revised Avoidance of Double Taxation Agreement with Switzerland. Second, on September 14, 2016, it signed the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The initiatives would help reduce and prevent tax evasion in future.
Development Expenditure:
Despite reducing fiscal deficit over the last three years, the minister said allocation for Public Sector Development Programme (PSDP) had more than doubled and during FY 2017, the budget deficit (borrowing) would be only for its development spending, which was a milestone achievement.
He said the current account deficit increased to $ 5.5 billion in Jul-Feb FY17. This was largely due to a sizable increase in imports of capital goods, along with delayed receipts of Coalition Support Fund (CSF).
Ishaq Dar said the rise in overall import payments was mainly driven by increased purchases and higher prices of fuel.
However, there was significant increase in capital goods imports, which, he added, would lead the economy to a higher growth path.
He said foreign exchange reserves at present were hovering around $ 22 billion, which were expected to reach over $ 23 billion by end of June, 2017.
“The government is committed to support the poor and the most vulnerable segments of population through BISP. Social safety net expenditures have increased by over 300 per cent through the four budgets of the current government,” he added.
He said significant expansion in allocation to BISP had taken place, which was enhanced from Rs 40 billion in FY 2013 to Rs 115 billion in FY 2017 leading to increase in coverage from 3.7 million to 5.45 million families.
Annual stipend, he said, had also been enhanced from Rs 12,000 to Rs 19,336 during the period, while more than Rs 299 billion was disbursed among the poorest families, as unconditional cash transfers.
“We continue to diversify financing from both domestic and external sources, lengthen the maturity profile of domestic debt and improve the balance between domestic and external debt,” he said, adding, “ To achieve these objectives, we have already published Medium Term Debt Management Strategy (MTDS) and are monitoring its implementation through preparation of risk reports on debt management.”
He said deepening of the energy sector reforms continued to be a priority agenda of the government. The prime minister, he added, lead regular monitoring of the efforts through the Cabinet Committee on Energy.
“We have added LNG to the system and are in the process of adding new terminals for its further imports,” he said, adding that performance of the banking sector remained steady with high credit growth, improved assets quality, robust solvency and reasonable earnings.
Dar said implementation of the doing business reform strategy, 2016 had earned recognition for Pakistan as one of top ten reformers in the world. Substantive reforms continued to be taken in all areas, especially in paying taxes, starting a business and registration of property.
He said the government was committed to continue its work to make Pakistan financially and digitally inclusive country.
