IMF asks Pak­istan to fo­cus on hu­man de­vel­op­ment

The Pak Banker - - FRONT PAGE -

The In­ter­na­tional Mone­tary Fund (IMF) has asked Pak­istan to re­duce im­port tar­iffs, en­sure Gen­eral Sales Tax har­mon­i­sa­tion, en­ter into free­trade agree­ments and take own­er­ship of un­der­funded Sus­tain­able De­vel­op­ment Goals (SDGs). At a joint meet­ing of the Se­nate and Na­tional As­sem­bly stand­ing com­mit­tees on fi­nance, a vis­it­ing staff mis­sion of the IMF briefed the par­lia­men­tar­i­ans on Pak­istan's trade growth, SDGs fi­nanc­ing and GST har­mon­i­sa­tion.

In­formed sources said the IMF team put SDGs cost­ing at Rs6.196 tril­lion un­til 2030 and wanted creation of ad­di­tional fis­cal space.

This came amid me­dia re­ports that Pak­istani au­thor­i­ties and the IMF mis­sion had com­pleted the sec­ond review of the $6bn bailout pro­gramme and agreed not to bring a mini-bud­get or in­crease taxes dur­ing the cur­rent fis­cal year de­spite a mas­sive rev­enue short­fall. How­ever, a fi­nance min­istry of­fi­cial said talks would con­tinue on Thurs­day.

Sug­gests cut in im­port tar­iffs, sign­ing of more free trade agree­ments The sources, how­ever, said the IMF team ex­pressed dis­sat­is­fac­tion over per­for­mance of the Fed­eral Board of Rev­enue (FBR) and gov­ern­ment's rev­enue re­forms as the key goal of the fund fa­cil­ity - broad­en­ing of tax base - did not see any tan­gi­ble progress. Equally dis­turb­ing was whole­salers' and re­tail­ers' re­sis­tance to doc­u­men­ta­tion.

"I am busy, can't talk," said Fi­nance Sec­re­tary Naveed Kam­ran Baloch when ap­proached for comment. IMF's res­i­dent rep­re­sen­ta­tive Teresa Da­ban Sahchez also did not re­spond to re­quest for com­ments.

Fi­nance min­istry's spokesper­son and spe­cial sec­re­tary Omar Hameed Khan said the talks had not been con­cluded yet and would con­tinue on Thurs­day. Some re­ports sug­gested the two sides agreed that rev­enue tar­get would not be fur­ther re­vised down­ward though FBR mem­bers ex­pressed their in­abil­ity to cross Rs4.8 tril­lion against a bud­geted tar­get of Rs5.55 tril­lion this year.

The gov­ern­ment, how­ever, com­mit­ted to give its max­i­mum to get as close to the re­vised tar­get of Rs5.238bn as pos­si­ble. This was re­in­forced by Ad­viser to the Prime Min­is­ter on Fi­nance Dr Ab­dul Hafeez Shaikh who told the Na­tional As­sem­bly that non-tax rev­enue col­lec­tion would sur­pass tar­get and hope­fully reach Rs1.5 tril­lion against pre­vi­ous es­ti­mates of about Rs1.1tril­lion.

The sources said the IMF mis­sion had not yet ab­sorbed the gov­ern­ment's de­ci­sion to keep a freeze on en­ergy prices for 18 months as the au­thor­i­ties had only re­cently fi­nal­ized a three­year cir­cu­lar debt re­duc­tion plan in con­sul­ta­tion with the lend­ing agen­cies, in­clud­ing the IMF, the World Bank and the Asian De­vel­op­ment Bank. That is where the au­thor­i­ties have to con­vince the lenders through their al­ter­na­tive plan be­fore the con­clu­sion of the on­go­ing talks.

PML-N MNA Dr Aisha Ghous-Pasha said the par­lia­men­tar­i­ans told the IMF staff that their pre­scrip­tions about SDGs and trade im­prove­ment ap­peared gen­uine but im­pos­si­ble un­til Pak­istan was un­der the Ex­tended Fund Fa­cil­ity of the IMF to be ad­hered to by the au­thor­i­ties for the next three years.

She said the two sides dis­cussed the coun­try's eco­nomic sit­u­a­tion in­clud­ing high in­fla­tion and stagfla­tion, ris­ing job­less­ness and con­tract­ing econ­omy but the IMF team did to make any firm com­mit­ment. PPP Senator Farooq H. Naek, who is also chair­man of the Se­nate com­mit­tee on fi­nance, said there was no dis­cus­sion on mini-bud­get at the meet­ing but the IMF wanted the gov­ern­ment to take own­er­ship of the SDGs and work to­wards de­liv­er­ing those tar­gets.

He said the Fund noted Pak­istan's im­port tar­iff to be too high and wanted its ra­tio­nal­i­sa­tion and also sug­gested greater in­cen­tives to small ex­porters to in­crease ex­ports. At the same time, the IMF en­cour­aged Pak­istan to en­ter into free trade agree­ments (FTAs) with more coun­tries, or else ex­porters would not be able to in­crease ex­ports. Mr Naek said the par­lia­men­tar­i­ans took up the is­sue of ris­ing in­fla­tion fol­low­ing the IMF pro­gramme as the au­thor­i­ties were con­tin­u­ously in­creas­ing power and gas rates, forc­ing more people into the poverty trap but got no an­swers.

Some mem­bers ques­tioned the bias against lo­cal in­dus­try un­der the terms of trade as part of IMF pro­gramme that en­vis­aged zero taxes on im­ported ma­te­ri­als com­pared to 17pc GST on lo­cal prod­ucts. MNA Sherry Rehman said the uti­liza­tion of funds for SDGs and its qual­ity was greater prob­lem than un­der­fund­ing. She said the gov­ern­ment was not ready to talk to the op­po­si­tion on na­tional is­sues that could have been help­ful in pre­par­ing a com­mon strat­egy to face chal­lenges and take a united stance over IMF pre­scrip­tions in­stead of con­sid­er­ing mini-bud­gets.

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