The IMF and Pakistan have agreed on a macroeconomic framework and a revised 2010-11 budget deficit target to rein in inflation and aid flood rebuilding, a senior IMF official said on Friday, according to Reuters. "Progress has been made regarding the measures to be implemented in the context of the authorities' economic stabilisation and reform agenda, while protecting the poor," IMF mission chief to Pakistan Adnan Mazarei said in a statement.
He said the fund was committed to ongoing talks with Pakistan to complete the fifth review of the country's loan programme.
Our staff reporter Zaheer Abbasi from Islamabad adds: The International Monetary Fund (IMF) mission made it clear to Pakistan before leaving for Washington after a week-long talks that the government has to put in place the required things to qualify for the release of the next tranche, it was reliably leant. Sources said that visiting IMF mission led by Adnan Mezarei wanted country's economic managers to translate key performance criteria into action prior to the meeting of its Board.
A stiff stance taken by the IMF mission over performance criteria particularly in relation to Reformed General Sale tax (RGST) and reforms in power sector issues, was disturbing for the economic managers who would be running from pillar to post in the two critical meetings on Monday - meeting of Council of Common Interests (CCI) and a separate meeting with provinces on RGST - in a desperate effort to fix things. Another official said that the programme might be in trouble if some visible and concrete action were not taken by Pakistan to ease global lending agency's concerns.
The IMF mission which was here from October 27 to November 5 for completion of fifth review of Pakistan economy under Stand-By Arrangement (SBA) of $11.3 billion would now be visiting Islamabad on November 13 on the request of Pakistani government for resumption of talks.
"There are certain things to be put in place by Pakistan before we go to our board," an official of the visiting mission told Business Recorder, requesting anonymity. However, he claimed, that talks were continuing in a frank manner. "We look eye to eye each other during the talks" he said that Pakistan appeared committed to implementing RGST.
Sources said that prior to meeting with the IMF mission, Finance Minister Dr Abdul Hafeez Sheikh held a meeting with the Minister for Petroleum and Water and Power to discuss with him the possibility of diverting maximum gas to power sector to minimise tariff differential in electricity and thereby circular debt.
However, Secretary Finance, Salman Siddique claimed that good progress had been made during the policy-level talks with the IMF, saying that "I think we are almost there. We focus more on getting the things out of the way and a meeting of provinces has been convened on Monday to evolve consensus on RGST". Salman said good progress was also made towards budgetary framework. "We will try to place RGST before the current session of the Parliament and there would be a signing off with the World Bank and Asian Development Bank (ADB) of reformed plan of energy sector prepared by Deputy Chairman Planning Commission," he said.
Replying to a question, he said that Pakistan had received $8.6 billion from the $11.3 billion total augmented SBA. He evaded a question that how the 4.7 percent fiscal deficit for the current fiscal year allowed by the IMF would be achieved. According to him, the tax target for the outgoing fiscal year will be Rs 1,650 to Rs 1,655 billion.
Meanwhile, a handout given to media by the Finance Ministry stated that the IMF mission, led by Mazarei, has been engaged in discussions with the Government of Pakistan on the fifth review under the Stand-By Arrangement (SBA). Progress has been made in agreeing to a framework for the revision of the 2010/11 budget, reflecting the additional burdens faced by the economy and the poor due to the unprecedented floods. The objective remains to further strengthen the public finances and macroeconomic stabilisation so that priority spending can be assured and inflationary pressures kept under check and reduced.
The government also proposes to finalise in the coming days the legislative framework for the Reformed General Sales Tax (RGST), for submission to Parliament. Measures to curtail energy subsidies have been discussed with the World Bank and the ADB and with the key stakeholders. The Government of Pakistan proposes to meet with Mazarei and his team on November 13, and to continue the constructive discussions following the PDF.
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