Business

Pakistan ready to meet IMF now

Irshad Ansari July 28, 2010

ISLAMABAD: The release of $1.7 billion, the sixth instalment of the aid package being offered by International Monetary Fund (IMF), will be discussed between Pakistani representatives and officials of the Fund on August 23 in Washington.

A senior official of the finance ministry said that the talks would be much more productive as a breakthrough had been reached between the Centre and provinces on the issue of tax collection under the reformed General Sales Tax (GST).

The government has also decided to go ahead with the marketing of euro bonds worth Rs500 billion during the economic team’s visit to the United States.

The delegation will fly to New York for one day where it will visit the New York Stock Exchange (NYSE) and meet with potential investors. A conference will also be organised where the team will meet those investors who have purchased the previous three bonds issued by Pakistan.

Sources have revealed that the finance ministry along with the Economic Affairs Division has already started planning the issuance of these bonds.

In order to determine the appropriate time for issuing the euro bonds, the Pakistani side will also conduct meetings with international credit rating agencies. The hiring of financial experts in an advisory capacity and the holding of roadshows will also be discussed during these meetings.

Meanwhile, the federal budget for the current year will come under scrutiny in the talks with the IMF. The Fund is expected to question the Pakistani side on financing arrangements made to overcome the budget deficit. Tax targets will also be evaluated during the discussions.

This round of talks has been labelled crucial since Pakistan has not been able to fulfil many of the conditions imposed by the IMF as a prerequisite for releasing the second last tranche of the bailout package.

Although the government has been able to convince the IMF about the introduction of the reformed GST in place of the proposed value added tax, not limiting the budget deficit and borrowing from the central bank still remain thorny issues.

Sideline meetings will also be held with the IMF to ascertain the feasibility of issuing the euro bonds.

Published in The Express Tribune, July 29^th, 2010

COMMENTS (1)

Rana Umair A Khan | 13 years ago | Reply Manly there are two ways to finance the budget deficit in all countries. First a country should raise it taxes secondly the way of debt financing. The later is like a poison pill that mostly has its severe side effects. Government should discuss in details with Central bank( Monetary Policy Makers) than they should make their fiscal policies so to avoid the budget deficits. Also Government should not adopt an aggressive approach to meet with budget deficit it should also overlook on it Foreign Exchange and it can be done by reducing its imports or by increasing it exports. I think the later one is in our hands and we can easily manage it by preferring our domestic products and promoting our local investors. By relying heavily on Debt Financing a country might go to bankruptcy and already Pakistan’s rating is not good according to Moody’s and S&P ratings, so relying on heavy debt is as taking a poison pill. Here I would like to mention about a little bit about poison pills. Firstly it was used by Adolf Hitler’s Army. When his soldier saw the situation of surrender they took the pills and they killed themselves. And now this technique is also popular in Managerial Finance before the acquisition by a hostile organization. So, it seems that there might be an upcoming takeover by a hostile organization or it seems that our Government wants to take short run benefits by hook or by crook even by taking these types of poison pills. And as for as Bond issuing concern I think our Government should see in details on our IRR ( internal rate of return and it must be more than required rate of return ) before issuing foreign bonds to meet with heavy coupons those we‘ll have to produce against those bonds.

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