Imran Ali Kundi
Published Date: Dec 25, 2019
Slow growth, Fatf grey-list may impede loan package: IMF
ISLAMABAD – International Monetary Fund (IMF) Resident Representative for Pakistan Teresa Daban Sanchez on Tuesday said that country’s slow economic growth and inclusion in FATF’s grey-list remained major stumbling blocks in the way of loan programme.
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“The country’s name continues feature in FATF’s grey list, which could have implications for capital inflows to Pakistan,” she said during a conversation with relevant stakeholders on the occasion of first quarterly review of 39-month arrangement made for Pakistan under the EFF.
The event was organised by the Sustainable Development Policy Institute (SDPI).
She further said that Pakistan’s overall macro-economic performance remained satisfactory, since revenue collections had increased substantially, and there was improvement in the trade deficit and net foreign assets.
Teresa said that though inflation has started to stabilise, but food price inflation continued to be a major concern. “Owing to stabilization policies of the government, public debt, although at a high level, continues to be sustainable,” she noted.
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She further said there was a successful transition towards a market-based exchange rate regime by the government which helped increase foreign exchange reserves. “The government has also been successful in controlling expenditures with the help of new public finance management law and by avoiding borrowing from the central bank. However, economic activity is softening as the economy adjusts to new stabilization policies,” she added.
Teresa, while highlighting the risks to the programme’s sustainability, said that slow economic growth could undermine the programme’s fiscal consolidation strategy and opposition to institutional reforms, which may result in stagnant economic growth and hamper the population to benefit from the reforms. “Since the ruling Pakistan Tehreek-e-Insaf (PTI) is not in majority in the upper house, provinces may under deliver on their surplus commitments,” she apprehended.
“The authorities’ steadfast commitment to the programme, decisive policies and reform implementation could help mitigate these risks,” she said, adding close monitoring, with quarterly reviews, which allows for adjustment and improvements coupled with strong support by the international community, in the form of financial assurances can help tackle the risks and ensure faster recovery.
IMF Resident Representative said that as per the Memorandum of Economic and Financial Policies (MEFP), the government was committed to strengthening the tax administration and advancing the tax policy by eliminating exemptions by the FY2021 and a joint working group on harmonization of GST (end-March 2020). “Moreover, under the MEFP, the government will improve the services of state-owned enterprises (SOEs) through privatization of two LNG plants by FY2020 end, and by publishing audit reports of PIA and PSM-Pakistan Steel Mill (Dec 2019 end) coupled with new SOE legal framework and triage of SOE, both by end Sept 2020.
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Regarding poverty reduction and social protection actions as envisaged in MEFP, the authorities are committed to higher spending by increasing BISP allocations by Rs180 billion.
While responding to a question, Teresa clarified that the IMF did not dictate economic policies to the government.
SDPI Executive Director Dr Abid Qayyum Suleri said that despite positive first quarterly performance review by the IMF, there was so much misunderstanding and negativity on our national media about it.
He said the purpose of holding this conversation with relevant stakeholders was to remove misunderstandings and negativity surrounding the first performance review. “This programme and its review will determine the way forward and the short-term, medium-term and long-term vision of the government with regard to the economic policy making for Pakistan,” he concluded.