Finance Minister Ishaq Dar left for Dubai on Wednesday to take part in policy-level discussions with the International Monetary Fund (IMF) with a view to successfully persuading the IMF staff to release the fourth and fifth tranches amounting to $1.1 billion by December in support of country’s balance of payment (BoP) position.
An official who requested anonymity said that the two-day policy level talks would begin today (Thursday) between Pakistani authorities and IMF staff level mission for combined fourth and fifth review of the economy under $6.67 billion Extended Fund Facility (EFF).
The official said that apart from reforms and a tariff hike in the power sector, the appointment of DG Debt and head of National Electric Power Regulatory Authority (Nepra) as well as circular debt and the slow pace of privatisation would dominate the policy level discussions. The IMF has reportedly expressed its concerns over the quantum of subsidies provided to the power sector and the tediously slow moving efforts towards granting real autonomy to the State Bank of Pakistan (SBP).
The country is facing serious problems in terms of gross financing requirements in the current fiscal year on account of maturing debt obligations as well as to finance the budgeted fiscal deficit of 4.7 percent. Pakistan needs 29.2 percent of GDP gross financing requirements, says IMF Fiscal Monitor October 2014. This includes 24.5 per cent of the GDP on account of maturing debt and 4.7 of the GDP to finance the fiscal deficit in 2014.
The IMF forecast that Clinically Adjusted Primary Balance (CAPB), which is required to reduce the debt, is in deficit (negative) 0.2 per cent. As a result, the country would rely on borrowing to meet the financing requirements. Sources in the Finance Ministry acknowledged that disbursement of $1.1 billion by the IMF is very critical for BoP support and stability of exchange rate. They said the government is relying on foreign inflows including $1.1 billion from the IMF as well as inflows from other multilaterals/bilaterals including China under Pak-China economic corridor to bring down the country’s exchange rate below Rs 100 by the end of the calendar year.
They conceded that a deficit of 0.2 per cent in primary balance- revenue minus non-interest expenditure implies government’s continued reliance on borrowing to meet the debt obligations. However, they said the country would soon overcome the primary deficit and begin meeting its debt obligations without recourse to any foreign reliance.
SOURCE: RECORDER REPORT