IMF programme ‘on track’, govt insists – Newspaper

ISLAMABAD: The government said Friday that its reform agenda signed with the International Monetary Fund (IMF) was on track and that progress so far in almost all performance and structural benchmarks for the first quarter of the current fiscal year were Very encouraging with a strong indication that all objectives will be met.

“The progress in almost all structural and performance benchmarks during Q1FY20 is encouraging and the objectives will be met. The finance ministry is fully committed together with the IMF towards the ongoing reform program, ”said the finance ministry.

Apparently, the ministry was forced to issue the statement after certain media reports on the renegotiation of the program due to significant fiscal deviations at the conclusion of fiscal year 2018-19. The ministry said it believed that "the objectives of the IMF program are ambitious, there is no need to renegotiate."

The ministry said media misunderstandings arose over the scheduled visits of the IMF director for the Middle East and Central Asia, Jihad Azour, and the technical team over the next two weeks.

He said the ministry will meet next week with Azour and inform him of the results achieved so far. "However, this is not an IMF review mission as some media segments have suggested." Azour's visit was scheduled for September, shortly after the completion of the Extended Fund program.

The next visit of the Fund team is a routine, not a "review"

Discussions on the IMF technical levels are expected to take place at a later stage after the end of the first quarter of the year and will provide both teams with the opportunity to review the progress made to date, he added.

The IMF Country Representative in Pakistan, Teresa Daban Sánchez, tells Dawn that the IMF program for Pakistan “will be monitored and reviewed according to the revision schedule set out in the program documents. The first one is scheduled for December. "

The language suggests that Azour's visit is not a "review mission."

She said visits by IMF teams are part of her routine work with member countries. The IMF is currently preparing a staff visit for the period from September 16 to 20, he said. At this stage, she could "only but reiterate the strong commitment of the Government of Pakistan to the policies and reforms set forth in the IMF-supported program."

Fiscal framework

The ministry also dispelled the impression that the government will face a gap of up to Rs1 billion in the FY20 fiscal framework. He said that fiscal results for fiscal year 19 were due to concerns about the slowdown in growth and that there were three key factors, including monetary and exchange rate corrections, the need to protect citizens from rising oil prices and expansion. of the social safety nets and the escalation in the border with India that contributed to the fiscal deficit that rises to 8.9 percent of GDP, against the 7.2pc target.

He said that the State Bank of Pakistan had taken a political direction to correct the large trade deficit and prop up foreign exchange reserves.

These measures have helped reduce the current account deficit (CAD) to $ 13.5 billion in fiscal year 19, below $ 19.9 billion in fiscal year 2018. However, the increase in interest rates and a weaker rupees have led to a significant jump in the costs of government debt service. These contributed Rs104bn to the overall slippage.

On the other hand, the devaluation of the currency eroded the earnings of the SBP for fiscal year 19, with a deficit of Rs135bn in non-tax revenues.

The non-tax revenue deficit was exacerbated by the telecom operators' litigation over the renewal of 3G / 4G licenses, and the revenues of Rs80bn did not materialize in fiscal year 19. This issue is now partially resolved with operators of telecommunications depositing 70,000 crore in September as the case continues. The government also faced a deficit of Rs85bn of interest receipts from PSEs (NHA, WAPDA, etc.).

The fiscal revenue deficit of Rs321bn was the most important reason for the increase in the fiscal deficit and was driven by a drop in imports (representing 45{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of the total collection of FBR taxes on customs duties, general sales taxes (GST) and special taxes).

However, other key factors also contributed. In particular, the government's decision to protect national consumers from rising oil prices resulted in a deficit of more than Rs 100 billion in the collection of GST.

Against the revised target of 7.2pc of GDP (published in April), at the beginning of the program, the fiscal year closed at 8.9pc of GDP, indicating a slip of Rs686bn, the ministry admitted.

Posted in Dawn, September 7, 2019