Pakistan will begin to make repayment to the International Monetary Fund (IMF) with first payment of $417 million today (Friday) while the remaining amount of $1.2 billion tranche would be paid before June 30, 2012. A top official of the Finance Ministry said the second portion of $433 million was due in May 2012 and the rest of the portion of first instalment would have to be repaid by June 2012.
He also identified greater risks to the budget and external account from possible increase in oil prices in the international market and non-materialisation of budgeted external inflows on account of Coalition Support Fund (CSF) and Etislaat. He was even sceptical about materialisation of auction for 3-G licences in the current fiscal year.
The official who requested anonymity appeared overly cautious about the future picture of the country's economy despite higher growth in exports and remittances during the first seven months of the current fiscal year. According to him, the government may not have the fiscal cushion to forego petroleum levy to give relief to people in petroleum prices as a cut in levy would have serious impact on fiscal side.
The official said that Rs 120 billion was estimated on account of petroleum levy in the budget whereas total collection in July-January 2011-12 was merely Rs 30 billion against the target of Rs 75 billion, which means the government already sacrificed Rs 45 billion on this account.
He said the subsidy on petroleum products was neither viable nor targeted and the government protected the vulnerable and weak in society by providing targeted subsidy. For this purpose, an amount of Rs 50 billion, in addition to a subsidy on electricity, had been earmarked for BISP that would benefit 6 million people. Additionally, he said the government had also been providing a Rs 30 billion subsidy to protect essential commodities.
He said 70 percent resources from divisible pool, after the implementation of the 7th National Finance Commission (NFC) were now being transferred to the provinces on various heads in addition to their 57 per cent share. The provinces are now required to also share the burden of revenue mobilisation, according to him. All the federating units, he said were required to fulfil their responsibility in terms of taxation. Insofar as the federal government has been fulfilling all the basic requirements in this regard, according to him.
Replying to questions, he said the role of Ogra in oil prices was not more than that of a post office as it was only announcing changes in domestic oil prices in light of changes in international market. In response to a question, he said the effort of the economic team would be to strike a balance between the political and economic considerations through demonstration of fiscal discipline and mobilise revenue generation.
To a question whether the country would be entering into another IMF program, he said although there was no harm in going to the Fund if there was a balance of payment crisis, Pakistan had been surviving without the IMF since 2010 and would make all out efforts to continue to maintain a sustainable situation.
Another official of the Finance Ministry said that total foreign inflows during the first seven months for the project financing and program assistance on performance based indicators stood at $1.3 billion as compared to $1.03 billion for the same period of last year and net inflows after the deduction of principal amount stood at $482 million against $46 million for the same period of last year. About disbursement under the Kerry Lugar Bill, he said it was to the tune of $650 million during the last two years. He also said more than $1 billion projects had been contracted out under the program. He said that debt swap of Rs 151 billion for power sector would not have any impact on the current or coming budgets.
About the overall performance of the first seven months, the official said that GDP growth projected at 3.6 per cent for the current fiscal year could soar to 4 percent due to improvement in crop production. Inflation is expected to remain below its budgetary target of 12 percent.
The fiscal deficit for the period was contained to 3.1 percent while expenditure to 52 percent against the target of 58 percent. Exports grew by $14 billion, 7 percent higher over the same period of last year. Remittances stood at $7.4 billion, 21 percent higher from the same period of last year while revenue collection stood at Rs 972 billion, up by 26 per cent over Rs 772 billion for the same period of last year. According to him, Rs 1952 billion revenue target may be achieved.