IMF programme precondition: measures proposed to contain fiscal deficit

The Finance Ministry has proposed multiple expenditure adjustment and revenue measures of Rs 550 to Rs 600 billion by the federal government and provinces to contain the fiscal deficit within the limit agreed with the International Monetary Fund (IMF).
Sources said the IMF delegation has made it clear to the economic managers that discussion on the IMF programme would be strictly linked to compliance with the condition of fiscal deficit agreed with the Fund. Sources said that proposed measures to bring down the budget deficit to meet the condition of the IMF were discussed with Pakistan Muslim League (N) during talk on economic reforms agenda and their support was sought on implementation of revenue generation as well as expenditure cut.
The proposed saving by the federal government is Rs 264 billion by scaling down development expenditure to Rs 140 billion from Rs 280 and Rs 24 billion on account of current expenditure in the current fiscal year. Provinces would require to save Rs 131 billion by cutting their development and current expenditure.
This would include Rs 111 billion cut in development expenditure and Rs 20 billion saving from current expenditure by the provinces. An amount of Rs 7.4 billion is being envisaged by withdrawing SROs exemptions. Some savings are also expected on account of flood victims' assistance worth Rs 70 billion received by international donors. So far Rs 32 billion have been distributed through Watan Cards and Rs 8 billion for Rabi crops to farmers.
Sources said that provincial surplus is expected at Rs 100 billion by the end of current fiscal year from Rs 300 billion shifted to them under new National Finance Commission Award. The discussions were also held with the Pakistan Muslim League (Nawaz) team on the implementation of proposed measures of flood surcharge and increase in Federal Excise Duty (FED) to generate Rs 31 billion.
The government also proposed restoration of Petroleum Levy on POL products to cover up Rs 30 billion loss on this account. The government team wanted the PML-N team support for passage of flood surcharge and FED from the parliament by March 2011. Around Rs 35 billion saving is also being envisaged from Rs 90 billion allocated in the budget for Benazir Income Support Programme (BISP). Sources said that Pakistan Railways had demanded Rs 49 billion for the current fiscal year but the government has agreed to give Rs 30 billion, which would help save Rs 19 billion. Similarly, tariff adjustment would be made to contain power subsidy.