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IMF negotiations to conclude today

Tranche worth $1.3 billion contingent upon delegation’s report.

Irshad Ansari November 02, 2010

ISLAMABAD: Final policy negotiations between the International Monetary Fund (IMF) and Pakistan will start on Wednesday.

Pakistan’s delegation will be led by Minister for Finance Dr Abdul Hafeez Shaikh while the IMF delegation will be led by Adnan Mazarei.

Discussions will be held on the progress towards the targets set by the IMF for the release of the next tranche of $1.3 billion under its standby arrangement (SBA). Targets for the economy for the current fiscal year will also be discussed and finalised.

If negotiations prove successful, then the case for the release of the next tranche will be presented before the IMF’s executive board at its meeting on December 17. The board will take a decision based on the recommendation of the IMF delegation.

According to sources, it is expected that the target for Gross Domestic Product (GDP) growth will be 2.8-3 per cent, inflation target will be 13-14.5 per cent and fiscal deficit will be targeted at 4.5 per cent of GDP. Targets will be finalised during the negotiation process.

Sources said the IMF is pressuring the country to keep fiscal deficit to a minimum. The IMF has also pointed out the country’s poor track record and said it is important for the country to honour the conditions, said sources.

The IMF has also pressed the importance of levying the reformed general sales tax and eliminating all subsidies on electricity.

Sources indicated that Shaikh, along with Secretary for Finance Salman Siddique, State Bank Governor Shahid Kardar and Planning Commission Deputy Chairman Dr Nadeemul Haq met with the president on Tuesday to push through reforms that might be used to successfully negotiate with the IMF.

RGST talks

Federal and provincial representatives will meet again on Wednesday to resolve the deadlock over the draft of Reformed General Sales Tax (RGST) bill between Sindh and the federation. The row is over collection of tax from seven service categories including stock brokers, commission agents, clearing and forwarding agents, studios, shipping agents, customs agents and courier services.

Sindh maintains that since the input tax adjustment on the seven services is a mere 0.1 to 1 per cent, it will not hand over the responsibility of their collection to the federation.

If the deadlock is broken, the government will not only be able to finalise the RGST draft and present it to the federal parliament for approval, it will also help them in their ongoing negotiations with the IMF.

Published in The Express Tribune, November 3^rd, 2010.

COMMENTS (3)

Syed A. Mateen | 13 years ago | Reply Taking loan from IMF is the basic sign that the present government is unable to deal with the issue of fiscal deficit. The past Prime Minister Mr. Shaukat Aziz told to the nation that he has broken the begging bowl. From where did the begging bowl came again in the lime light? Despite having highest level of educational degrees (whether original or fake) our economic managers do not know how to run the country. Since our economic managers were going to primary schools, they have learned one thing and that is to beg from the IMF and World Bank and till today they are continuing from the lesson they learned in primary school classes and thus are unable to take out Pakistan from the circular debt. The government feel proud in taking loan from the IMF and the World Bank, but do not know that how a common man is affected with its policies. The unprecedented price hike in petrol, sugar, wheat, electricity, gas and water, telephone is a clear indication that the sitting government has lost its credibility and not respecting the mandate given by the people of Pakistan. Had Mohtarma Benazir Bhutto (Shaheed) been alive today, Pakistan would have been in a much better position.

Jibran | 13 years ago | Reply I believe we are not in a condition to state what we want, house isn't in order and we clearly need IMF support to avoid disaster. What's more, what the IMF is demanding does make long term economic sense although at a very high short term cost.

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