Neutral ground: Venue for talks with IMF shifted to Dubai

Lender to assess Pakistan’s economic health before determining nature of future relations.

ISLAMABAD:

After strains in relations between Pakistan and the International Monetary Fund (IMF), the venue of upcoming talks between the two sides has suddenly been shifted to Dubai where economic data will be scrutinised before determining the nature of future relations.

Informed sources told The Express Tribune that the IMF has asked Pakistan to come to a third country for mandatory Article-IV consultations scheduled immediately after Eidul Azha. Article-IV talks are held on the desire of the IMF which tries to assess the member country’s economic health besides ‘recommending’ some remedies to forestall any crisis.

Owing to the change of venue, a planned seminar on the future of Federal Board of Revenue (FBR) after the 18th Constitutional Amendment will not be organised. Officials of the finance ministry were tight lipped about the change.

On the basis of these consultations, the IMF mission will prepare a report which will be presented to its executive board by early next year.

There are speculations that the talks may provide a blueprint for a new IMF programme.

An $11.3 billion IMF bailout ended inconclusively in September after remaining suspended for 16 months due to the government’s inability to introduce key reforms.

IMF’s Washington-based spokesman Gerry Rice commented last week that “there is no request for a programme from Pakistan at the moment”.

In Dubai talks, the IMF will try to project close-to-reality twin deficits – budget and external account gap, as experts have termed the finance ministry’s numbers unrealistic.

The ministry has estimated budget deficit at 4 per cent of total national output or Rs850 billion while a recent IMF report put the figure at 5.3 per cent or Rs1,126 billion. Independent experts are of the view that actual deficit may remain well above 6.5 per cent or Rs1,381 billion.

They have questioned the government’s claim of expected receipt of Rs118 billion from the United States on account of coalition support fund, Rs75 billion through auction of Third Generation (3G) telecommunications licences and Rs70 billion outstanding payments for PTCL privatisation.

Moreover, the government has not fully budgeted subsidy impact of 1.2 million tons urea import, which will come to Rs52 billion. Similarly, Pakistan International Airlines (PIA) is seeking a Rs60 billion bailout package and Pakistan Railways wants Rs11.5 billion injection for revival. Both of these elements were not taken into account at the time of budget preparation.

Experts are also skeptical about FBR’s claim that it will collect Rs1,952 billion in taxes this year.

Sources said on the sidelines of the talks, both the sides may also work out prior actions required before seeking a new IMF programme. These measures include privatisation of loss-making public sector enterprises, layoffs in Pakistan Railways, PIA, Pakistan Steel Mills and power distribution companies to reduce administrative expenses and phasing out electricity subsidies.

Though the government denies it needs a loan programme this fiscal year, experts are of the view that the country may need IMF assistance keeping in view the economic indicators of the first quarter of the current fiscal year.

Both the sides will also try to determine the exact gap on the external front. The IMF has projected that the current account deficit – gap between external payments and receipts – may be $3.9 billion or 1.7 per cent of national output.

Published in The Express Tribune, October 29^th, 2011.