First review of IMF programme kicks off

ISLAMABAD: Projecting core inflation at 12.4 per cent, fiscal deficit at 7.4pc and higher debt levels despite better revenues in FY20, the International Monetary Fund (IMF) began discussions with Pakistan authorities over its first quarterly review of the $6 billion 39-month economic programme.

Informed sources said the visiting IMF mission had preliminary discussions on first quarter (July-September) data relating to revenue collection, its breakup and the reasons for shortfall of about Rs113bn. The two sides also discussed reasons for lower-than-targeted tax refunds. The Federal Board of Revenue (FBR) briefed the mission that glitches causing delays in refunds have been removed through replacement of relevant tax forms and data interface for input and output calculations.

The IMF mission raised questions over the revenue integration between federal and provincial tax systems and authorities. The mission told that a draft agreement for single return form and single revenue portal were shared with the provinces, informed source said. Another official explained that in fact, some of the provinces had rejected the draft and linked its signing to removal of their concerns.

The two sides also touched upon the revenue projections until December this year, based on first quarter performance, and how shortcomings were being addressed. The two sides would remain engaged in technical level discussions and exchange of data from all the economic sectors until this weekend and then start policy level talks to be led by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh.

The review talks coincided with the launch of IMF's Regional Economic Outlook (REO 2019) on Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region. The outlook estimated Pakistan's consumer price index rising from 7.3pc in 2019 to 13pc in 2020. It put the core CPI increasing to 12.4pc in 2020 from 8.3pc in 2019.

The fund estimated the net lending to slightly reduce to 8.4pc of the GDP in 2020 when compared to 8.9pc in 2019 and fiscal deficit declining to 7.4pc of GDP in 2020 against 8.8pc in 2019. This was despite the fact that general government revenue is estimated to improve to 16.1pc of GDP in 2020 from 12.7pc in 2019. This would partially be driven by the increase in government expenditure and net lending to 23.6pc of GDP in 2020 from 21.6pc in 2019. The total gross government debt, on the other hand, is also projected to increase from 76.7pc in 2019 to 78.6pc of GDP in 2020. The net government debt is also estimated to increase from 72.5pc of GDP to 75.2pc.