Besides IMF loans, govt to get $2-3b from World Bank, ADB
Adviser to the Prime Minister on Finance, Hafeez Shaikh, has said that besides the IMF programme, the government will be able to borrow an additional $2-3bn worth of programme loans from the Asian Development Bank and World Bank.
He further said that the International Monetary Fund (IMF) loan programme that Pakistan is about to enter into has a lower rate of interest as compared to other programmes. The advisor on finance acknowledged that the programme was being debated upon heavily in the media as well as by the country's intelligentsia.
"The IMF is an organisation which has been formed solely to assist member countries which are faced with financial difficulties," he said during a press conference in Islamabad. "It is not a new thing and many countries have availed the facility as have we in the past many times. "The programme we have obtained has a magnitude of $6bn and is spread over three years. The good thing about it is that the rate of borrowing is much lower than other programmes. The interest rate is 3.2 per cent."
Shaikh said that entering the programme would "send a good signal to the international community that Pakistan wishes to take its economy forward in a disciplined manner and people will find incentive to form alliances and partnerships with us". Shaikh also laid out a road map for what is to come in the coming weeks with regard to economic developments in the country, indicating that important decisions will be made after the upcoming budget announcement.
The advisor highlighted six points to this effect: A staff-level agreement was reached with the IMF and over the next few weeks their board will accord their approval and the programme will become operational.
In Pakistan, due to the benami law and other traditions of the past, there is a lot of money which is not part of the formal economy. A scheme will be introduced to make all the cash, real estate and other assets - both here and abroad - part of the economy. The oil facility provided by Saudi Arabia worth $3.2bn per year for three years will become operational on July 1. The pressure on foreign exchange reserves will be reduced as a result.
Besides the IMF programme, we will be able to borrow an additional $2-3bn worth of programme loans from the Asian Development Bank and World Bank. The annual budget will be announced. The government's philosophy and determination to bring Pakistan on track for stability and prosperity will be reflected in the budget. The Islamic Development Bank's deferred payment facility worth $1.2bn will continue in the year to come. The advisor on finance also spoke regarding the Asset Declaration Scheme recently approved by the cabinet.
"As far as our asset declaration scheme goes, we have made things very easy. Any Pakistani national anywhere can benefit from the scheme. The rate is only 4 per cent.
"If it is cash [you wish to declare] then you will have to show the money in the bank. And if it is real estate, then according to the approximate market value and [tax] payment at 1.5 per cent, you can have it [the property] "whitened".
He said that the intention is to make "dead real estate assets" a part of the economy and to increase the tax base with such declarations.
Shaikh took the opportunity to remind everyone that the deadline to avail the scheme is June 30, after which "it is natural that action may be taken against individuals who did not avail the offer timely". Menawhile, The International Monitory Fund’s programme is going to be very tough and painful for Pakistan in coming days, said Dr Ashfaq Hassan Khan, a member of the Economic Advisory Council, in an exclusive interview.
Dr Khan is the principal and dean of the School of Social Sciences and Humanities at National University of Science and Technology. “The basic purpose of the IMF programme is to choke Pakistan’s economy and restrict its GDP growth,” he remarked. He predicted that the GDP growth will be restricted to 2% to 2.5 %. “This is the game plane.”
It is going to be a painful path for Pakistan. It will be full of difficulties as the Pakistani government will have no other option but to take some tough measures to meet the IMF’s conditions as prior actions. “These prior actions include exchange rate adjustments, increase in electricity and gas tariff and tax measures in the upcoming 2019-20 budget,” he said.
The FBR is likely to collect Rs 3950 billion rupees tax revenue during the ongoing fiscal year 2018-19 and if the government sets an annual target in between Rs 5,300 billion to Rs5,400 billion for 2019-20, it means 38 % growth in tax revenue for New Year, which is not possible, he said. If the government fails to meet its tax revenue target then it will have to cut down the defence and development budget, which would be very difficult for them, he added.