IMF’s March meeting outcome to determine inflows for budgetary support
Budgetary assistance from bilateral or multilateral credit agencies depend on the outcome of an upcoming meeting of International Monetary Fund (IMF).
The budgetary support lending from the World Bank and Asian Development Bank depends upon the IMF satisfactory report and government’s ability to keep foreign currency reserves held by SBP (State Bank of Pakistan) for over two months import.
The IMF’s executive board is scheduled to meet soon in Washington DC for considering approval of report on Pakistan’s post programme monitoring (PPM) in order to gauge economic health of the country. Other creditors will decide future budgetary support for Pakistan on the basis of the decision.
As the country is moving close to general elections the IMF report will be considered important to set the course of actions for Pakistan’s ailing economy.
In 2016, Pakistan successfully completed the IMF’s $6.7 billion extended fund facility loan programme, but the country failed to undertake desirable structural reforms to boost exports, curtail imports, broaden tax base and overcome losses of cash-bleeding state-owned entities and energy sector that again turned the economy into crisis mode within just one and half year after the end of IMF programme.
Pakistan and the IMF staff have revised macroeconomic projections for the current fiscal year after which Advisor to Prime Minister on Finance Miftah Ismail and Governor State Bank of Pakistan (SBP) Tariq Bajwa signed PPM report in mid February and allowed the IMF to release the report after getting approval from its executive board.
Pakistan and IMF agreed to keep budget deficit projection at over 5 percent of GDP for the current fiscal year of 2017/18 as against the target of 4.1 percent; last year, budget deficit stood at 5.8 percent. The federal government blamed provinces for the high deficit during the last fiscal year.
Budget deficit came at 2.2 percent for the first half of the current fiscal year. Nonetheless, the budget deficit if kept at 5 percent of GDP during the electioneering year would be considered as a miracle on the part of the incumbent regime because spending spree might grip the dwellers of finance ministries both at the centre and provincial levels during the last quarter of the ongoing fiscal year.
Pakistan also agreed with the IMF to keep development spending at around Rs800 billion to Rs850 billion in the current fiscal year instead of the actual allocation of more than Rs1,000 billion.