ISLAMABAD:- Due to breaching of some structural benchmarks including the announcement of tax amnesty scheme, PM relief package and currency fluctuation, Pakistan required to get waiver from the Executive Board of the International Monetary Fund (IMF) to complete the ongoing 7th review meeting.
It is pertinent to mention here that Pakistan had availed more than one dozens waivers from IMF in the last loan program signed on 2013 during Nawaz Sharif Government.
Sources said that the IMF has raised serious objections during ongoing talks with Pakistani authorities on the tax amnesty scheme, PM relief package and other steps for which Islamabad had given commitments that it would not do it in future.
The IMF has asked Pakistan increase discount rate, allow free movement of the exchange rate, slash down Kamyab Pakistan Programme (KPP) and reverse relief package measures to align it with prudent financial management, sources said.
Couple of weeks ago, the government had announced relief package for slashing down petrol, diesel, and electricity prices as well as granting tax amnesty to the industrial sector. It has also enhanced the Kamyab Pakisan Progrom upto Rs407 billion for which the IMF has also concerns.
The International lending agency has also some reservations on widening of current account and budget deficits.
Pakistan and Fund had agreed to restrict the current account deficit at $12.2 billion for the current fiscal year. Contrary of the target, the current account deficit ballooned to $11.6 billion so far. The budget deficit is also likely to cross Rs4.3 trillion which would be Rs320 billion higher from the target despite Rs 360 billion additional revenue through mini budget, Rs200 billion by squeezing the development budget.
Interest payments, Covid-19 related expenditures, energy subsidy and other social safety measures are main contributing factors for rising budget deficit, the government sources believe.
The Washington based lending agency has also concerns about the pace of privatization process by Pakistani authorities. Pakistan had estimated in budget more than Rs.200 billion revenue from the privatization proceeds but still could not get single coin from this front.
This has not only decreased the estimated income but also increased the government expenditure for running the loss making Public Sector Enterprises (PSEs).
In a response of the query, The Resident Representative of the IMF mission in Islamabad, Esther Perez Teresa said “The authorities and the IMF will continue to discuss recent developments and other measures to promote macroeconomic stability”.
The policy level talks are expected to be concluded at Wednesday. Finance Minister Shaukat Tarin will lead Pakistani delegation to convince the IMF team on the above mentioned issues.
Pakistan needs to get waiver from the IMF’s Executive Board on the breaching of agreed structural benchmarks during the last review for approval of ongoing review and next tranche of $960 million. The Board meeting is likely to meet on end of next month if the ongoing talks complete successfully at staff level, sources further said.