Country has entered period of stagflation: IMF team told

The International Monetary Fund (IMF), while expressing concern over the Federal Board of Revenue's (FBR's) performance, has suggested harmonization of general sales tax (GST), creating fiscal space for increasing spending on sustainable development goals (SDGs), reducing import tariff, and increasing free trade agreements, to boost exports.

This was stated by the members of the Senate and National Assembly's standing committees on finance after an in-camera meeting with the visiting IMF team on Wednesday. It was stated that the members of the committees communicated to the IMF team their concerns that the country was going through stagflation as there was no improvement in the economy and inflation was rising rapidly.

Additionally, they stated that the IMF team was informed that growth in exports and industry was not possible with higher energy tariffs. National Assembly's Standing Committee on Finance Chairperson Faizullah told media that the IMF team made presentations to the committee on various aspects of the economy as well as on the SDGs.

The team was of the view that Pakistan must create fiscal space to increase spending on SDGs of education, health electricity and sanitation, etc. Faizullah, while responding to a question by media persons, said he was confident that there would be no 'mini-budget', and whatever measures were requested, would be taken in budget for the next fiscal year.

Senate Standing Committee on Finance Chairperson Senator Farooq H Naek said that there was no discussion on the 'mini-budget', and the IMF team gave presentations specifically covering SDGs, free trade agreements, trade and sales tax issues. He added that the IMF suggestion was to increase fiscal space to increase spending on the SDGs, and increasing free trade agreements to increase exports.

Naek stated that the members of the committees pointed out that increase in electricity gas tariff under the IMF programme had increased the cost of living and poverty as well as higher food inflation but the IMF team did not respond to the members' concerns.

Another member stated that the IMF team was of the view that exports had started receiving hits due to import compression and proposed that small exporters must be promoted and red tapism be reduced.

He said the IMF team stated that Pakistan's exports to China were six percent and with the US 16 percent. He further stated the IMF team also pointed out lack of ownership of the SDGs and stated that Pakistan needed to put more efforts to achieve the targets.

He said that Pakistan would require over Rs6.2 trillion for achieving SDGs in 10 years.

Aisha Ghaus Pasha, former Punjab finance minister and member of the National Assembly's Standing Committee on Finance stated that the committee was given three briefings by the IMF and those presentations were with regard to how growth could be fuelled through trade as well as funds required for the SDGs and on harmonization of the GST.

She said that members of the committee pointed out the fact that all those things were not happening under the Extended Fund Facility (EFF), which would continue for three years.

Pasha said that instead, members argued that there was stagflation in the country as economy is not growing while inflation is rising rapidly.

She said the members expressed their reservations with regard to inflation, poverty and other issues in the economy, and those issues came under discussion but there was no assurance from the IMF.

Sherry Rehman stated that Pakistan's economic situation is grave as there is "no investment" in the country and changes at the top level of the FBR and the finance ministry are frequent.

She said the IMF team pointed out that the SDGs were under-funded but in committee's point of view there exist issues in relation to quality of utilisation. Rehman said that instead of presenting a 'mini-budget', the government should sit with the opposition.