Finance Minister Ishaq Dar on Thursday said that talks on ninth review with International Monetary Fund (IMF) concluded successfully and Pakistan would receive $502 million tenth tranche under $6.6 billion Extended Fund Facility (EFF) next month. Addressing a joint press conference with Herald Finger, the IMF mission chief for Pakistan, Dar stated that two targets of ninth review, fiscal deficit by Rs 23 billion and Net Domestic Assets (NDA), were missed.
Pakistan will receive $900 million in the ongoing month with $500 from the World Bank and $400 million from Asian Development Bank. The Minister added that IMF estimated Pakistan growth at 4.5 percent for the current fiscal year but the government will make efforts to achieve a 5.5 percent GDP growth. He said inflation, which was initially estimated at 4.7 percent, has now been lowered by the Fund at 3.7 percent.
Talks between Pakistani authorities and the IMF mission commenced in Dubai on October 26, 2015 and were scheduled to conclude on Wednesday November 4, 2015, but hiccups especially on review collection led to a delay by one day and two sides met in Islamabad to give them final touches before making public announcement for the success of review. He said that Pakistan has mostly met the performance criteria set by the IMF under a home-grown programme. As of 30th of the last month, he said Pakistan has foreign exchange reserves of $20.073 billion. These include $15.25 billion of State Bank and $4.82 billion of commercial banks.
IMF mission chief Finger stated that Fund staff mission visited Dubai and Islamabad during October-26 to November 5, 2015 to conduct discussions with Pakistani authorities on the Article IV Consultation and the ninth review of their economic and financial programme supported by a three-year IMF-EFF arrangement.
"After productive discussions, the mission and the Pakistani authorities have reached staff-level agreement on the completion of the ninth review subject to approval by the IMF management and the Executive Board. Upon completion of this review, SDR 360 million (about US $502 million) will be made available to Pakistan," he said. A statement handed over to media stated that "economic activity continues to improve while challenges remain. Real GDP is expected to grow by about 4.5 percent in fiscal year 2015-16, helped by lower oil prices, planned improvements in the supply of energy, and investment related to the China Pakistan Economic corridor (CPEC).
At the same time, the slowdown in private credit growth and weakness in exports and imports are weighing on growth prospects. Headline consumer price inflation is expected to increase to around 4.5 percent by end-fiscal year due to a likely bottoming out of the effects of low commodity prices, but to remain well-anchored by continued prudent monetary policy. Gross international reserves reached US $15.2 billion by end-September 2015, up from US $13.5 billion end-June 2015 and covering close to four months of prospective imports.
"The mission welcomes the authorities' continued commitment to their IMF supported economic reform programme, which has significantly reduced near-term risks," it added. The end-September 2015 quantitative performance criteria on the SBP's net international reserves, government borrowing from the SBP and foreign currency swap/forward position were met and so were the indicative ceiling on accumulation of power sector arrears and the indicative floor on social spending under Benazir Income Support Programme (BISP).
However, the performance criteria on net domestic assets (NDA) and the fiscal deficit were missed, as was the indicative target on tax revenue. The mission welcomes the authorities' plans to take action to attain the budget deficit and tax revenue targets for fiscal year 2015/16 and to bring NDA in line with program targets.
"Article IV discussions focused on the reform agenda to increase structural resilience and competitiveness of the economy and generate a stronger and sustainable growth momentum, which remains an important medium-term challenge," it said. The authorities are making progress with consolidating macroeconomic stability and tackling structural obstacles to growth with several important structural reforms in various stages of preparation or implementation. Completing this agenda is critical for Pakistan to achieve its broader economic objectives, and continued effort will be important in the period ahead. Finger further stated that in this context reform efforts should continue to focus on strengthening public finances and external reserve buffers, and on accelerating steps to widen the tax net to create space for more infrastructure investment and social assistance. In addition, key priorities for growth include restructuring or privatising loss-making public enterprises, advancing the energy sector reform, improving the business climate, promoting gender equality, and further expanding coverage under the BISP to protect the most vulnerable.
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