ISLAMABAD: In the wake of worsening fiscal front of the economy, the IMF has decided to send its SOS (Save Our Soul) mission to Pakistan this month for suggesting ways and means to curtail the yawning budget deficit.
The IMF team will discuss fiscal issues with special focus to restrict target of primary deficit within the desired limits. Pakistan has initially tabled option of renegotiating targets envisaged under the IMF programme in the context of emerging new realities on fiscal front as the FBR’s quarterly target has been requested to revise downward from Rs1.071 trillion to over one trillion rupees for end September 2019.
Also Read: IMF deal could be renegotiated
A video conference held between Pakistan and the IMF team on Wednesday night in which the Fund staff expressed its serious concerns over sharp rise in the budget deficit in the last fiscal year ended on June 30, 2019 that proved all projections wrong made by IMF and Finance Ministry at the time of negotiating IMF deal of $6 billion under the 39-month Extended Fund Facility (EFF).
The IMF team will conduct a staff visit to Pakistan during September 16-20, Teresa DabánSanchez, IMF Resident Chief in Pakistan, confirmed to The News on Thursday night. “An INF technical team is scheduled to visit Pakistan after Ashura Moharram probably from September 17 for staying here for 10 days,” said the official sources. The IMF’s review was expected to take place in November but the decision of dispatching this technical mission suggests that the IMF is not happy with massive slippages on fiscal front.
The fiscal targets especially primary deficit has misaligned massively as the IMF has placed condition to bring down the primary deficit from 1.8 percent of GDP to 0.6 percent of GDP in the current fiscal year. Now the primary deficit had gone up to 3.6 percent of GDP and no one knows how massive adjustments of Rs1,300 billion could be made to slash the primary deficit to 0.6 percent of GDP.
“Yes, an IMF technical mission is coming to Pakistan within this month”, confirmed top official sources while talking to The News here on Thursday. They said that the upcoming technical mission will be providing assistance to Ministry of Finance and other ministries/departments on tax and non-tax revenue collection, fixing cash bleeding state-owned entities and devising strategy on issues related to central bank front.
The IMF team inquired about the reasons for escalation in the budget deficit as both sides had estimated in April 2019 that the budget deficit might touch 7.2 percent of GDP for the last fiscal year 2018-19 so this projection became the basis of the IMF programme with the primary deficit projected at 1.8 percent of GDP.
“When the basis of IMF programme has shaken what is the guarantee that the envisaged targets for the current fiscal year will be materialised”, the IMF side raised question. Pakistani team explained that the FBR faced shortfall owing to variety of policy issues and slowdown of the economy. On non-tax revenue front, they said that the renewal of licences of mobile operators could not be materialised in the last fiscal but now Rs70 billion has been received. Two RLNG plants could not be sold out and they were hopeful that this transaction would be done in first half of the current fiscal year. The SBP profit nosedived due to devaluation. All these negative developments contributed to hike of the budget deficit to 8.9 percent of GDP for the last fiscal year.
On the current fiscal year targets, the FBR told the IMF team that they would be going for annual tax collection of Rs5.5 trillion provided with a few pre-requisites in shape of deployment of technology and allowing effective enforcement but first of all the quarterly target must be readjusted downward. The FBR could collect Rs425 billion to touch psychological barrier of collecting Rs1 trillion in first three months of the current fiscal year.
(This news/article originally appeared in The News on September 6th, 2019)