IMF remains focused on revenue collection, circular debt, external financing
Business
Pakistan assures IMF of reducing govt expenditure, minimizing budget deficit
ISLAMABAD (Dunya News/Web Desk) – The International Monetary Fund (IMF) has expressed its concerns over the government failure to address the circular debt issue – a challenge considered vital to reduce budget deficit – and other matters related to the power and gas sectors, sources said.
At the same time, the IMF is not satisfied with Pakistan’s position on external financing – funds provided by friendly nations and international financial institutions in the shape of loans – which is a prerequisite to meet the financial needs amid insufficient revenue generation.
Moreover, the sources also say that the Washington-based institution also wants Pakistan to revise the fiscal framework which may result in more hikes in power and gas tariffs as the government has failed to expand tax base for an enhanced revenue generation.
However, Caretaker Finance Minister Shamshad Akhtar on Monday said Pakistan had assured the IMF of following austerity and reducing government expenditure to control budget deficit.
She expressed these views in an informal chat with Dunya News after the IMF and the government launched policy-level talks as part of the ongoing first review of the $3 billion stand-by arrangement.
At the same time, Akhtar promised that the government won’t further burden the masses and revenue collection target would stay at Rs9,415 billion – a clear reference to the recent hikes in gas and power tariffs and the IMF’s insistence on expand tax base for collecting more taxes.
The caretaker finance minister said progress was being made in the IMF talks, adding that the world’s top lender had complete confidence in the steps taken by the government and was satisfied with the Benazir Income Support Programme (BISP) and the development spending.
Earlier on Monday, the visiting IMF team and the Pakistani officials began discussions on policy matters after the two sides completed talks on technical issues concerning various issues, especially the power and gas sectors.
During the policy-level talks, Pakistan may face tough demands as the IMF is fully focused on reducing the fiscal deficit and the external financing required to bridge the gap between the government income and expenditure.
A successful review will result in the release of $710 million in second tranche in December (next month) – to be a followed by a similar exercise in February and March.
Akhtar and IMF Mission Chief Nathan Porter are leading the sides during the latest phase of review that is scheduled to complete later this week on Wednesday (Nov 15).
The day saw the Special Investment Facilitation Council (SIFC) officials briefing the IMF delegation on matters related to the expected direct investment and the tax exemption, as the world's top lender wants to expand the tax base for an increased revenue collection by removing the different concessions enjoyed by the business community.
At the same time, the Pakistani authorities from the finance ministry and the FBR shared information with the IMF representatives on subjects like currency market and exchange rate as well as institutional reforms, privatisation and circular debt.
It is not just the government but also the businessmen and investors who are watching the progress made in the ongoing IMF review with a belief that inflation has started easing after reaching its peak and there won’t be any rate hikes in future.
However, there is a broad consensus that the interest rates, which have crippled the economy, aren’t going to slashed to the desired levels albeit one may see a rate cut after the next meeting of the State Bank of Pakistan’s Monetary Policy Committee.
Moreover, the government has already hiked the power and gas tariffs, a move meets one of the key IMF demands and addresses the circular debt issue.
At the same time, the investors are feeling that the privatisation of loss-making state-owned enterprises (SOEs) may gain momentum after years of stagnation, which will help the boosting the share prices of the stocks which are still undervalued when compared with the highs reached in 2017 despite the record-breaking surge being witnessed in the stock market.
