The government is not yet ready to face the International Monetary Fund (IMF) due to delay in finalisation of last fiscal year’s numbers, says Secretary Finance Dr Waqar Masood, highlighting the mismanagement on the part of economic managers while handling sensitive issues.
Masood said the data about the budget deficit, external budget financing, surplus being generated by provinces and actual revenue collection was still incomplete. His statement reflects poor performance by the finance ministry, as its spokesperson Rana Assad Ameen said on June 28 that entire data would be available by July 10 and the government would hold talks with IMF in the second last week of July.
According to an IMF statement issued in May, a mission would visit Islamabad in July. The talks were for a fifth review of the economy and a successful review may result in restoration of the suspended $11.3 billion loan programme. For the last one year, IMF is withholding the last two tranches of $3.4 billion. The talks are crucial for outlining Pak-IMF future course of action.
The IMF office in Islamabad also issued a statement on Tuesday, saying “the dates for the next visit by an IMF mission are being discussed and have not been set.”
Budget deficit
Sources in the finance ministry said a higher budget deficit, question mark over Rs1,590 billion in tax collection and lesser surpluses by the provinces have put economic managers in an awkward position. They added efforts are being made to show a lower budget deficit by “managing things”. In one case, the government has delayed payments to the flood-stricken people to keep the budget deficit at a lower side.
For the last financial year ended June 30, the government had estimated a budget deficit of four per cent of gross domestic product or Rs722 billion. However, after the floods the estimate was revised upwards to 4.7 per cent or Rs849 billion.
The Financial Times, a UK-based international business newspaper, reported on July 15 that Pakistan’s budget deficit ballooned to 5.7 per cent of GDP (Rs1,029.5 billion) excluding circular debt payments of Rs120 billion. By including the debt payments, it comes to 6.3 per cent of GDP or Rs1,138.8 billion.
When the secretary finance was asked about the budget deficit, he said the statistics were incomplete and the government would not be in a position to either contradict or confirm the Financial Times’ claim. He said actual savings made by provinces were not known as yet. According to sources, provinces have generated Rs106 billion in savings which were Rs61 billion less than what the federal government expected on the eve of last financial year’s budget.
Revenue collection
The secretary said FBR has not yet communicated the tax collection figures. Federal Board of Revenue Chairman Salman Siddique said on June 30 that the board had achieved the revised target of Rs1,588 billion and collected Rs1,590.6 billion. However, according to media reports FBR is now facing difficulties in giving an authentic figure which may create problems while negotiating with IMF.
It has never happened in the recent history that FBR’s tax collection statistics are unavailable even on July 19, said a senior official of the finance ministry.
Masood said the release of the second tranche of Rs16 billion for rehabilitation of flood-stricken people has been delayed due to data discrepancies as NADRA and Cabinet Division statistics were not reconciling.
Published in The Express Tribune, July 20th, 2011.
COMMENTS (5)
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@Ali Turk:
The final FBR figures include all sorts of gimmicks. Probably all countries engage in a little bit of "creative accounting".
The problem is that in our case we have the IMF breathing down our neck and they don't accept gimmicks, creative accounting or other one-off measures/factors that temporarily swell the tax revenue figures.
This is important because this years final figures will be the base for next year. The base will be "normalized" and all the one-off, exceptional factors taken out. That could affect next years target by 0.3-0.5% of GDP and if the target is still 4% of GDP, a 'financing gap' will emerge requiring NEW tax/spending measures to close it.
In any case, most observers feel the IMF SBA is dead-in-the-water. The only thing left then is to do what we need to do for our OWN good to keep a tight fiscal stance which can be financed by non-inflationary means, bear down on inflation and protect the external current account.
@rk singh:
Who told you that Pakistan claimed a growth rate of 10%?
My observation of the economic realities of pakistan are - they hidden under carpet and wrong projections are made. Wrong estimates are made. Bloated growth figures are shown- just to fool the public that they are doing a fantastic job. Pakistan has been a sick country for the last 15 years. But the GDP is just marginally behind India's at about 30% less. India has been growing an average of 8% for the last 15 yrs. Pakistan never had this figures ever. They claim they had "fantastic" growth bet 2005- 2009 of 10%plus. Hardly true.
When corrections are done in time, the picture will look real bad then.
What happened to all the aid that was promised by FRIENDS OF DEMOCRATIC PAKISTAN.
What hog wash....
We have $18 billion in reserve and then we go out asking for $1.5 billion in loans at 11%. Where is the $18 billion, where is it invested?,
Let us face it: IMF will not release additional tranche. It has had enough of excuses from Pakistan economic managers.
What a mess the entire Ministry of Finance is in......
The problem I guess is : FBR jumped the gun and came out with tax figures on 30th june which they may have latter realised were bit off.
Circular debt figures, payables etc have added to mess
AND where are those $18 billion reserves