ISLAMABAD: A delegation of the International Monetary Fund will visit Pakistan soon after the budget for the next fiscal year is presented to assess the country’s ability to deal with the financial crisis.
IMF’s Resident Representative in Pakistan Mansoor Dailami met with Finance Minister-designate Senator Ishaq Dar a few days ago in Lahore, sources claimed.
Both sides discussed the possibility of the new IMF bailout programme and the current precarious fiscal and balance of payments position.
Dailami and Dar had a 45-minute, one-on-one meeting following which officials from the finance ministry were allowed to join the two.
Dar confirmed to The Express Tribune that Dailami met him. He however said the purpose of the meeting was to decide a date for holding the Post Programme Monitoring discussions, which were overdue. Dar added the IMF team was expected to arrive in Pakistan on June 19 for the PPM dialogue.
He did not rule out the possibility of the new programme and said he would give a statement after his party formally takes over as the new government.
The visit looms as differences have emerged over the extent of the current account deficit that should be projected for the next fiscal year.
As against initial projections of a current account deficit equal to $2.9 billion or 1.1% of Gross Domestic Product for the fiscal year 2013-2014, the finance ministry is seeking to show a larger deficit to convince the incoming Pakistan Muslim League-Nawaz government to opt for an early IMF loan, sources revealed. The initial projections were made by the Planning Commission that is preparing next year’s annual plan.
The $2.9 billion projection has been made on the assumption that the deficit in the current fiscal year will remain at $1.9 billion, or 0.8% of GDP. In ten months the deficit stood at $1.4 billion, or 0.6% of GDP.
But the finance ministry wants to show a current account deficit of around $11 billion in the three year period and project the next fiscal’s deficit at around $3.5 billion, or 1.4% of GDP, sources said.
For a developing country a deficit of below 2% is considered normal but due to serious financing constraints, a deficit of even 1% appears too high, an analyst said.
After initial reports that the PML-N government may not opt for the IMF programme, for at least three to four months, ministry officials were trying to convince the new leadership to decide for an early bailout programme.
The finance ministry has its own reason for seeking higher projections. They think that in the medium term the current account deficit may remain higher than initial projections due to the increasing prospects of a healthy economic growth.
But the counter argument is that industries are running on less than half their capacity due to energy constraints therefore, the chances of major imports of capital goods were not very bright.
Published in The Express Tribune, June 5th, 2013.