IMF reiterates call for tightening belt
The IMF has issued Pakistan a stern warning to take steps to cut its spiraling budget deficit.
ISLAMABAD:
The country has been asked by the International Monetary Fund (IMF) to take concrete steps in order to reduce the spiralling budget deficit, the Wall Street Journal quoted a senior government official as saying.
In an official letter to the government, the international donor warned that the state of Pakistan’s economy was far worse than previously realised and urged the implementation of immediate measures to ensure fiscal tightening, according to a report appearing in the financial daily on December 30.
The Fund has withheld $3.6 billion from the last two tranches of an $11.3 billion bailout programme intended to help the country avoid default on international payments. The IMF programme, initiated in November 2008 for a 25-month period, was suspended in May this year after Pakistan failed to deliver on the promise of levying the value-added tax (later renamed) from July 1.
Until May the country had received five loan tranches worth about $7.7 billion in total.
On Monday the donor agency approved the request for a nine-month extension in the suspended $11.3 billion bailout programme, providing it with another opportunity to implement the reformed general sales tax (RGST). The extension will allow the country a chance to deliver on three unmet conditions.
Sources say that an IMF team will arrive in Islamabad by the end of January for negotiations on the following: zero borrowing from the central bank for budget financing, power sector reforms and the most controversial issue of the RGST implementation. International donors have linked their loans with the implementation of the new tax.
Published in The Express Tribune, January 1st, 2011.
The country has been asked by the International Monetary Fund (IMF) to take concrete steps in order to reduce the spiralling budget deficit, the Wall Street Journal quoted a senior government official as saying.
In an official letter to the government, the international donor warned that the state of Pakistan’s economy was far worse than previously realised and urged the implementation of immediate measures to ensure fiscal tightening, according to a report appearing in the financial daily on December 30.
The Fund has withheld $3.6 billion from the last two tranches of an $11.3 billion bailout programme intended to help the country avoid default on international payments. The IMF programme, initiated in November 2008 for a 25-month period, was suspended in May this year after Pakistan failed to deliver on the promise of levying the value-added tax (later renamed) from July 1.
Until May the country had received five loan tranches worth about $7.7 billion in total.
On Monday the donor agency approved the request for a nine-month extension in the suspended $11.3 billion bailout programme, providing it with another opportunity to implement the reformed general sales tax (RGST). The extension will allow the country a chance to deliver on three unmet conditions.
Sources say that an IMF team will arrive in Islamabad by the end of January for negotiations on the following: zero borrowing from the central bank for budget financing, power sector reforms and the most controversial issue of the RGST implementation. International donors have linked their loans with the implementation of the new tax.
Published in The Express Tribune, January 1st, 2011.