Pakistan and International Monetary Fund (IMF) have successfully completed negotiations on the Eighth Review under the 3-year Extended Fund Facility (EFF) program worth $6.2 billion that would lead to release of 9th tranche of over US$ 500 million.
Addressing a press conference at Dubai on Friday, Minister for Finance, Ishaq Dar said that completion of the 8th review is indicative of government's commitment in implementing structural reforms in areas of taxation, energy, monetary and financial sectors and public sector enterprises.
According to a press release of the Finance Ministry, the minister gave an overview of national economy and said due to declining oil prices in international oil markets and decrease of commodities prices in market, the current account position had improved and reduced burden of $2.6 billion that also put a positive impact in overall economy. The Minister said that forex reserves in the country were also recorded at highest level of economic history of the country and it had crossed $18 billion mark. The increasing reserves had enabled country for re-qualifying for the concessionary fund facility of $2 billion from International Bank for Reconstruction and Development (IBRD), he remarked.
He informed that revenue collection recorded 15 percent growth during fiscal year 2014-15 as compared to same period of last year where as real GDP growth rate was recorded at 4.24 percent in FY 2014-15, which was the highest in last 7 years. The minister said that IMF had projected a growth rate of 4.5 percent in FY 2015-16. However the government retains its goal of achieving growth of 5.5 percent this fiscal year.
The macroeconomic situation continues to improve and China Pakistan Economic Corridor project (CPEC) would further play a significant role in economic activity, he remarked. Inflation, he said is continuing on downward trajectory, the headline inflation (CPI) fell from 8.6 percent in FY 2013-14 to 4.5 percent in FY 2014-15 adding that in July 2015 CPI fell to a 12-year low of 1.8 percent as compared to 7.9 percent of the corresponding month of last year.
About balance of payment, the minister said that robust growth in workers' remittances and low oil prices continued to help contain the current account deficit. Foreign exchange reserves of SBP stood at US $13.8 billion and that of scheduled banks at US $5.0 billion as of July 31, 2015, he added.
Ishaq Dar said performance of the banking sector remained robust on the back of 52 percent surge in earnings and strong solvency as reflected in Capital Adequacy Ratio (CAR) of 17.2 percent. "We are moving ahead with the financial sector reforms agenda for strengthening the legal, regulatory and supervisory framework for safeguarding stability of the financial sector", he added. The government had reduced the budget deficit of 8.2 percent of GDP in FY 2012-13 to 5.5 percent of GDP in FY 2013-14 and with further reduction "we achieved a fiscal deficit of 5.3 percent of GDP in FY 2014-15", he remarked.
Ishaq Dar said the government is determined to continue on a path of fiscal consolidation to achieve budget deficit target of 4.3 percent of GDP in FY 2015-16. The government was also committed to reduce public debt, and lay the foundations for a more sustained growth. Despite the fact that the government is reducing its fiscal deficit, allocation for Public Sector Development Plan (PSDP) and social safety net expenditure has increased in successive budgets, he added.
The tax-to-GDP ratio, he said increased from 9.7 percent of GDP in FY 2012-13 to 10.4 percent in FY 2013-14, and reached 11.02 percent in FY 2014-15 by elimination of SROs, broadening of tax base and improved tax administration.