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The government has committed to the International Monetary Fund (IMF) to meet the revenue shortfall through petroleum development levy (PDL) and non-tax revenues, sources in the Ministry of Finance told Business Recorder.
They said that despite a disturbing reduction in the FBR capacity to meet its target of Rs 1360 billion - with total collections at Rs 1300 billion - the overall revenue target would be met through PDL and non-tax revenues.
According to a report on fiscal operations, compiled by Finance Ministry, total revenue of the country stood at Rs 834.478 billion in July-December period, including Rs 577.993 billion tax revenue and Rs 256.485 billion non-tax revenue.
The PDL collection on petroleum products was Rs 28.839 billion. The government is expecting to collect Rs 100 billion PDL during the current financial year to meet the revenue shortfall. It earned Rs 18.5 billion PDL during the current month alone, sources added.
Current fiscal years balance of payments is being affected by negative growth in exports, but it could be more than offset by gains due to decline in imports.
Monetary expansion envisaged during October is unlikely to be achieved in view of low Net Foreign Assets, and relatively low growth in the private sector demand. The broad money growth has been estimated at 8 percent, compared to 12 percent in October.
Sources said that in review of the second quarter, the actual foreign exchange reserves were over $10 billion, against the target of $8.2 billion. The borrowings of the government from the State Bank of Pakistan (SBP) were frozen at Rs 258 billion, which was to be bettered, or equalled at the end of December 2009. The actual borrowings amounted to Rs 206 billion. The deficit was Rs 249 billion, which was to be contained to Rs 261 billion in the first six months.
"Despite an impressive performance of the agriculture sector, the continuing slide in the manufacturing sector and pressures on exports both domestic and foreign demands are likely to be lower than what was estimated in October, 2008", sources added.
The growth rate for 2008-09 has been revised downward, from 3.4 percent to 2.5 percent. The year on year inflation in June is likely to decline to 10 percent, and average inflation for 2008-09 is now estimated at 20 percent, as compared to 23 percent in October. The interest rate will decline in line with the reduction of inflation.
Sources said that the government, under the IMF program, has committed to reducing inflation to 6 percent, with growth rising to 4 percent. They said, "The country is heading towards economic stability due to the stabilisation of exchange rate, reduction in inflation rate, a remarkable decline in trade and current account deficits, and a considerable reduction in budget deficit".
Pakistan secured a 23-month Standby facility of SDR 5.169 billion from the IMF in November, 2008. The first tranche, of SDR 2.067 ($3.1 million), was released on November26, 2008. Second tranche, of $850 million, is expected to be received the by the end of the current month.
The IMF standby program essentially envisages adherence to the targets set for the 2008-09 budget coupled with zero net borrowing from the SBP.
Pakistan is trying to increase its quota threefold in IMF as, after the failure of Hungary and Ukraine in meeting the requirements of the Fund for the second tranche, it may be possible for IMF to increase Pakistans quota from five to eight times.

Copyright Business Recorder, 2009

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