The Business Report
ISLAMABAD: The government has struck a deal with the International Monetary Fund (IMF) on financial packages for about $6 billion, PM’s Adviser on finance Dr Abdul Hafeez Shaikh announced on Sunday. He said this while speaking to state-run Pakistan Television (PTV).
The staff level agreement on economic policies, which could be supported by a 39-month Extended Fund Arrangement (EFF), is aimed to support Pakistan’s strategy for stronger and more inclusive growth by reducing domestic and external imbalances, removing impediments to growth, increasing transparency, and strengthening social spending, said a statement issued on IMF‘s official website.
“An ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards,” the statement read, adding that, “Financing support from Pakistan’s international partners will be critical to support the authorities’ adjustment efforts and ensure that the medium-term program objectives can be achieved.”
Led by its Washington-based mission chief Ernesto Rigo, an IMF team visited Islamabad from April 28 to May 11. The visit was originally scheduled to end on May 10, however, Rigo stayed in Pakistan for one more day to conclude the deal. “This agreement is subject to IMF management approval and to approval by the Executive Board, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments,” Rigo said in a statement.
“The EFF aims to support the authorities’ ambitious macroeconomic and structural reform agenda during the next three years. This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilisation and ensure a more equal and transparent distribution of the tax burden. At the same time, a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources. These efforts will create fiscal space for a substantial increase in social spending to strengthen social protection as well as in infrastructure and human capital development.
The modernisation of the public finance management framework will increase transparency and spending efficiency. Provinces are committed to contribute to these efforts by better aligning their fiscal objectives with those of the federal government.
“The forthcoming budget for FY2019/20 is a first critical step in the authorities’ fiscal strategy.
The budget will aim for a primary deficit of 0.6 per cent of GDP supported by tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and improve tax administration.
This will be accompanied by prudent spending growth aimed at preserving essential development spending, scaling up the Benazir Income Support Program and improve targeted subsidies, with the goal of protecting the most vulnerable segments of society.