Pakistan team to meet IMF on August 5 in Washington

ISLAMABAD: The International Monetary Fund (IMF) will meet a Pakistani delegation in Washington on August 5 for a review of the domestic economy. The meeting is expected to pave the way for release of over $1.8 billion from the IMF, the second last tranche of the $11.4 billion bailout package.

Finance ministry sources revealed that Pakistani officials would meet members of the IMF between August 5 and 12 in Washington. This will be the fifth review of Pakistan’s economy.

Finance Minister Dr Abdul Hafeez Shaikh and acting Governor of the State Bank, Yaseen Anwar, will lead the delegation.

Financial and monetary targets pertaining to April-June period of the preceding fiscal year will come under IMF scrutiny.

The IMF had delayed the meeting by a couple of months on the request of the Pakistani government as officials wanted to present final figures instead of relying on provisional statistics.

Sources pointed out that talks for the fifth review would be quite delicate as the government had not only breached the budget deficit target and central bank borrowing ceilings but was also unable to demonstrate any concrete development on the reformed General Sales Tax (GST) system aimed at abolishing all tax exemptions extended on political grounds.

The government has set October 1 as the new deadline to overhaul the sales tax regime after failing to implement Value Added Tax on July 1.

A senior official of the finance ministry explained that if the government was not able to convince the IMF about its sincerity in reforming the GST, then the Fund may delay the release of the next loan instalment of $1.8 billion.

The government was unable to meet the condition of restricting the gap between its income and expenditure to under Rs769 billion or 5.1 per cent of gross domestic product. According to provisional estimates, Pakistan has ended up with a budget deficit of 6.2 per cent.

The government has also borrowed over Rs45 billion from the central bank to finance its soaring expenditures. The revenue target was also missed by a wide margin of Rs65 billion.

Additionally, the IMF has sought amendments to the State Bank of Pakistan Act in order to provide the central bank with operational independence but at present the amendment bill is lying with the National Assembly Secretariat for approval.

Published in The Express Tribune, July 11^th, 2010.