Aim of IMF package is to restore balance: mission chief
Cites strengthening of institutions and economic stabilisation as two main pillars
PHOTO: FILE
WASHINGTON:
The overarching objective of the International Monetary Fund (IMF) programme is to restore external and internal balance in Pakistan so that the country can achieve sustainable growth, said IMF Mission Chief for Pakistan Ernesto Ramirez Rigo.
“I think the government’s programme, which is now supported by the fund’s programme, has two main pillars and I will develop each of them a little bit,” he said on Saturday in a conference call on the release of IMF staff report on the Extended Fund Facility for Pakistan.“The first pillar is obviously macroeconomic stabilisation. The second pillar is to strengthen and build institutions.”
On the first pillar of macroeconomic stabilisation, which was critical for restoring external and internal balance, the focus was on the fiscal side, given the large deficits and high debt, in order to improve revenue mobilisation, he said.
According to Rigo, the main problem in Pakistan is the low level of revenue collection relative to its gross domestic product (GDP) and relative to many other emerging markets and peer countries. “So, this is where we have put our focus,” he said.
IMF assesses Pakistan’s financing need at $25.5b
The IMF has focused on increasing revenues by broadening the tax base and not by increasing tax rates, he stressed. In addition to that, given the external sector conditions, the IMF has focused on having a flexible market-determined exchange rate, which should help restore balance, he added. He was of the view that it was going to help develop local financial markets, which were fundamental for growth and in the medium term, every country required financial deepening.
“The flexible market-determined exchange rate will also improve conditions for local producers and for the export sector,” he voiced hope. “In addition, there is a third pillar of macroeconomic stabilisation, which is to basically increase social spending.”
There was a substantial increase in allocation for some of the social programmes in the budget, he appreciated, adding that this was something that the IMF welcomed.
He underlined that the IMF wanted to make sure that the adjustment was on the revenue side and not on the expenditure side and budget 2019-20 sent a strong signal in that direction.
“Now, let me turn to the other main pillar of the adjustment, which is building institutions. This is going to be done in parallel, so it is not the sequencing … it is going to be followed at the same time as the macroeconomic stabilisation is put in place,” Rigo said.
He noted that this was basically about improving business and doing business in Pakistan, reducing red tape, streamlining regulations, having tax policy reforms, etc.
Rigo emphasised that the IMF programme was going to act as a catalyst where the authority provided a framework in which many other international partners were to participate. “The total amount of financing that the programme is going to be unlocking is around $38 billion,” he said. “I think you might have seen already that in our press release after the approval of the programme.”
Published in The Express Tribune, July 14th, 2019.
The overarching objective of the International Monetary Fund (IMF) programme is to restore external and internal balance in Pakistan so that the country can achieve sustainable growth, said IMF Mission Chief for Pakistan Ernesto Ramirez Rigo.
“I think the government’s programme, which is now supported by the fund’s programme, has two main pillars and I will develop each of them a little bit,” he said on Saturday in a conference call on the release of IMF staff report on the Extended Fund Facility for Pakistan.“The first pillar is obviously macroeconomic stabilisation. The second pillar is to strengthen and build institutions.”
On the first pillar of macroeconomic stabilisation, which was critical for restoring external and internal balance, the focus was on the fiscal side, given the large deficits and high debt, in order to improve revenue mobilisation, he said.
According to Rigo, the main problem in Pakistan is the low level of revenue collection relative to its gross domestic product (GDP) and relative to many other emerging markets and peer countries. “So, this is where we have put our focus,” he said.
IMF assesses Pakistan’s financing need at $25.5b
The IMF has focused on increasing revenues by broadening the tax base and not by increasing tax rates, he stressed. In addition to that, given the external sector conditions, the IMF has focused on having a flexible market-determined exchange rate, which should help restore balance, he added. He was of the view that it was going to help develop local financial markets, which were fundamental for growth and in the medium term, every country required financial deepening.
“The flexible market-determined exchange rate will also improve conditions for local producers and for the export sector,” he voiced hope. “In addition, there is a third pillar of macroeconomic stabilisation, which is to basically increase social spending.”
There was a substantial increase in allocation for some of the social programmes in the budget, he appreciated, adding that this was something that the IMF welcomed.
He underlined that the IMF wanted to make sure that the adjustment was on the revenue side and not on the expenditure side and budget 2019-20 sent a strong signal in that direction.
“Now, let me turn to the other main pillar of the adjustment, which is building institutions. This is going to be done in parallel, so it is not the sequencing … it is going to be followed at the same time as the macroeconomic stabilisation is put in place,” Rigo said.
He noted that this was basically about improving business and doing business in Pakistan, reducing red tape, streamlining regulations, having tax policy reforms, etc.
Rigo emphasised that the IMF programme was going to act as a catalyst where the authority provided a framework in which many other international partners were to participate. “The total amount of financing that the programme is going to be unlocking is around $38 billion,” he said. “I think you might have seen already that in our press release after the approval of the programme.”
Published in The Express Tribune, July 14th, 2019.