ISLAMABAD: The visiting IMF team has assessed that Pakistan is facing a financing gap of $10 to $12 billion after taking into account all the projections of dollar inflows during the current fiscal year 2018-19, The News has learnt.
The IMF estimated that the rising twin deficits — including the budget deficit and current account deficit — would continue haunting the economy of Pakistan over short to medium term. The Federal Minister for Finance, Asad Umar, confirmed to The News on Wednesday night that he would be attending the upcoming annual meeting of the IMF/World Bank, scheduled in Bali, Indonesia, from October 8 to 14, 2018. However, the sources said the government has not yet formally taken the decision to approach the IMF but there are strong indications that the government may have to take the crucial decision on this front within the ongoing month.
“Without taking remedial measures on internal and external fronts, Pakistan’s economy will see severe difficulties whereby the GDP growth will be slowed down and the inflationary pressures will rise,” the sources quoted the IMF team as saying during the final phase of the ongoing talks. However, the Pakistani authorities have estimated that the external financing requirement could be reduced to $8 to $10 billion by taking more remedial measures on the external front of the economy. The government claims that the tightening of monetary, fiscal and exchange rate policies have started paying dividends and more corrective measures could be taken to ease out pressures on the pressures on balance of payment front in weeks ahead.
Pakistan and the visiting staff team of IMF entered into final round of parleys here on Wednesday whereby assessment of number crunching on macroeconomic front will be done. The IMF team will make its own assessment and initial staff report as outcome of ongoing talks will be shared with Pakistani authorities.
“The IMF staff team has assessed that the financial requirement will be standing at around $10 to $12 billion for Pakistan,” said the official sources while talking to The News here on Wednesday.
The IMF team has estimated that the pressures of twin deficit was going to persist for Pakistan during the current fiscal year as the Fund team estimated that the budget deficit might cross 6 percent of Gross Domestic Product (GDP) against officially envisaged target to curtail it at 5.1 percent of GDP.
“The IMF assessed that the government has overestimated the revenue collection and underestimated the expenditure side so the budget deficit might touch and even cross 6 percent mark for the current fiscal year,” said the official.
The visiting staff team of International Monetary Fund (IMF) is scheduled to conclude talks on Thursday (today) but the possibility of extending talks up to Friday cannot be ruled out at the moment.
The IMF team wondered over budget making process of the government and pointed out that the government envisaged Rs342 billion net external borrowings in the revised budgetary estimates for 2018-19 against Rs730 billion in the last budget 2017-18 ended on June 30, 2018.
It’s surprising that when Pakistan was looking for external inflows desperately the government was projecting almost half the amount than it’s obtained in the last fiscal year.
Islamabad’s economic managers again estimated revenue surplus of Rs286 billion on behalf of provinces in the revised budget despite this fact Finance Minister Asad Umar had criticised it publicly even after presenting mini-budget, however, the bureaucracy in the Ministry of Finance had inserted it again into revised budget documents for 2018-19 for which Asad Umar had labelled the PML-N presented budget as unrealistic.
(This news/article originally appeared in The News on October 4th, 2018)