Technical-level talks end: IMF fears fiscal deficit may reach 7pc of GDP

January 16, 2013

International Monetary Fund (IMF)
International Monetary Fund (IMF)

ISLAMABAD: The technical-level talks between International Monetary Fund (IMF) and Pakistani authorities concluded here on Tuesday with IMF expressing serious concern over the government’s failure to implement reforms in the power sector and broaden tax revenue, informed sources told BR.

The IMF mission is currently in the country on Post Programme Monitoring (PPM) mission. The IMF fears an escalation of the budgeted fiscal deficit to 7 percent of GDP in the current fiscal year against budgetary projection of 4.7 percent, it is learnt.

Sources said that policy level talks with IMF on macroeconomic framework scheduled for Tuesday but delayed due to the ‘long march’ would now start from tomorrow (Thursday). Pakistani authorities would be facing a tough time during the policy level talks for their failure to take required measures to broaden tax base and reform the power sector.

An official said the policy level talks would provide the basis for macroeconomic framework of the country for the next three years. The IMF noted that fiscal deficit may reach 7 per cent of GDP due to considerable shortfall in revenue collection, non-materialisation of other budgetary non-tax revenue and higher than budgeted subsidies to power sector.

Sources said during the technical level talks, data was shared by the Pakistani authorities about various sectors of the economy. On the power sector the IMF viewpoint was that World Bank and Asian Development Bank are not satisfied with the government’s performance. An official on condition of anonymity said during the discussion, the IMF pointed out appointment of people from DMG in the power sector instead of professionals, which was one of the major factors for current state of affairs. The induction of professionals at top position was considered by the IMF as a critical component of reforms in the power sector, which could be highly instrumental in attracting investment.

The issue of subsidies was also discussed during the meeting on power sector and the IMF concern was that entire subsidy allocated to the power sector in the budget has already been consumed during the first six months of the current fiscal year with sluggish progress of the government in terms of recovery of dues.

About the revenue collection target of the current fiscal year, according to sources, the IMF reportedly stated that Federal Board of Revenue is unlikely to achieve budgetary revenue collection target. It was conveyed to the FBR that it may not achieve even the downward revised revenue collection target of Rs2,231 billion during 2012-13 and total collection may not exceed Rs2,190 billion.  The IMF was of the view that Pakistan’s gross domestic product growth for the current fiscal year is likely to remain at 3.5 percent.

Sources said in case of prolonged political uncertainty owing to the ‘long march’, the tax authorities may suffer revenue loss which would make achievement of the target even more challenging. The IMF was also skeptical about achieving projected target of inflation due to heavy borrowing of the government to finance budget deficit.

Courtesy: BR

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More