Imran Ali Kundi
Published Date: Apr 15, 2021
IMF can’t dictate country’s legislation, institutions, says Daban Sanchez
ISLAMABAD – The International Monetary Fund (IMF) on Wednesday clarified that it could not dictate country’s legislation and the institutions but just play an advisory role upon a request.
About autonomy of regulators and a perception that is being compromised under IMF program, Ms Teresa Daban Sanchez, the Country Representative of IMF in Pakistan reiterated that all the reforms that have been recommended were long due and were necessary for help of the poor and vulnerable. Ms Sanchez, while commenting on FATF compliance, said that the progress so far and plan for the future was encouraging regarding the FATF. However, the plan execution will need more rigorous measures.
She said that the Extended Fund Facility (EFF) to Pakistan was all set to achieve some major goals including revenue-based fiscal sustainability. It is being achieved through the strategy by removing exemptions and privileges, enhancing social and productive spending, coordination with provinces, and elimination of quasi-fiscal circular debt and SOE losses. She said this during a keynote session with Dr Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI) on Wednesday.
Policies needed to be adjusted with reality
Ms Sanchez said that goals that were very important for the future direction of the country, also included a market determined and flexible exchange rate as well as the independent central bank with primary focus on price stability. Moreover, strengthening of social safety net to protect the most vulnerable was a key requirement in addition to strengthening institutions and bringing reforms, especially in the areas of PFM, central bank’s autonomy, tax policy and administration, energy sector, SOEs administration and FATF etc.
Shedding light on the impact of Covid-19, she remarked that the economy was on track with 2.4 percent growth rate till March 2020. However, after May 2020, it witnessed decline by 1.5 as resources were diverted towards Covid-19 mitigation and containment. She added further that Pakistan received $1.4 billion funds from IMF (Rapid Financial Instrument) in April 2020 and also from World Bank and Asia Bank on the basis of multi-lateral area to mitigate this challenge. “In the current situation and amid the third wave of the pandemic, the growth projected at 1.5 % of the GDP and inflation will remain volatile,” Ms Sanchez said and added that the monetary policy was accommodative and fiscal policy was prudent but the public debt guarantees increased to 92.8 percent.
She emphasized that a recalibration of policies and reforms and increasing the revenue collection, ambitious tax policy reforms and broad base fiscal structural reforms are the need of hour. In the energy and gas sector, a recalibration of the Circular Debt Management Plan (CDMP) which includes short-and-medium term measures like increasing revenue by aligning power tariff with cost recovery levels, reducing generation costs, streamlining fiscal impact, would be important. It could be achieved by targeted subsidy and governance issues like NEPRA act amendment, reducing TD losses and theft that were the major pillars for the program.
“Although, the Covid-19 shock temporarily suspended the progress of EFP, but the authorities remained committed to the ambitious policy actions and structural reforms to strengthen to economic resilience, advance sustainable growth and achieve the EFP the medium-term objectives,” she added.