IMF may take on Pakistan for missing fiscal deficit target
May 03, 2009
ISLAMABAD: Pakistan is likely to default on the most important performance target of fiscal deficit of 4.2 percent of GDP due to fall in tax revenue and indications that this trend will continue till June 30, 2009.
This will invite strong criticism from the International Monetary Fund during the upcoming Dubai talks scheduled on May 4-11, officials said.
The next budgetary target of revenue may be revised downward during the Dubai parleys. Pakistan’s official experts delegation is to leave on Sunday for Dubai to discuss the second review of the IMF loans and third review of the ongoing fiscal would also be discussed in detail.
The policy talks would start from May 9 and end by May 11, a senior official at Ministry of Finance told The News.
Secretary Finance Salman Siddique will head the delegation comprising Additional Secretary (External Finance) Asif Bajwa, Joint Secretary External Finance Mumtaz Malik, Joint secretary Budget Talib Baloch, Economic Advisor to Finance Ministry Zameer Ahmad and Deputy Economic Advisor Zafarul Hasan and Section Officer (External Finance) Saeed Ahmad.
Two officials of FBR Afzal Kiani, member Tax Policy and reforms and Mumtaz Haider Rizvi, Member Fiscal Research will also be included in the delegation. Some officials from State Bank of Pakistan would also join the delegation in Dubai.
Advisor to Prime Minister on Finance Shaukat Tarin, FBR Chairman Ahmad Waqar and Governor State Bank of Pakistan will join the talks on policy level on May 9.
“Pakistan is at ease as it has met all the targets set for the second review of the IMF loan and third review of the ongoing fiscal,” Asif Bajwa spokesman of the Ministry of Finance told The News.
The official sources said that Fund might express its fear that Pakistan may not achieve the fiscal deficit target of 4.2 per cent of GDP keeping in view the massive shortfall in tax revenue collection.
The gap between tax revenue and overall revenue target has widened to large extent that has put fiscal deficit target of 4.2 percent of GDP in the red zone. Even the non-tax revenue target of Rs90 to Rs95 billion to be collected through Petroleum Development Levy will not be enough to bridge the massive shortfall.
However, the economic managers of the country are optimistic to attain the most crucial budget deficit target of 4.2 percent of the GDP. “Yes it is difficult task of attaining the fiscal deficit target of 4.2 percent budget deficit of the GDP by June 30 in the wake of massive shortfall in tax revenue. But Ministry of Finance will achieve the target through non-tax revenue means,” Asif Bajwa spokesman of Finance Ministry said.
However some of the officials are of the view that the government may get the dividends of the OGDCL and other public sector entities before time and also get some of the amount from profits of the State bank of Pakistan to achieve the fiscal deficit target.
“And in case the said target fiscal deficit is not materialized by the government, then the future tranches after June 30, 2009 under 23 months Stand By Arrangement loan of $7.6 billion may be delayed exposing the country’s economy to more crises,” the official said.
During the Dubai talks, Pakistan’s budget will be fine tuned as IMF under the 23-months $ 7.6 billion bailout package has already fixed the main targets for next fiscal 2009-10 that include the budget deficit target of 3.3 percent (Rs525 billion), expenditure target of Rs3.064 trillion (current expenditure Rs2.435 trillion, debt servicing Rs751 billion, defence expenditure Rs380 billion and development expenditure Rs 616 billion).
The revenue target for 2009-2010 was earlier agreed with IMF at Rs2.521 trillion including tax revenue of Rs1.879 trillion and non-tax revenue Rs642 billion.
This will invite strong criticism from the International Monetary Fund during the upcoming Dubai talks scheduled on May 4-11, officials said.
The next budgetary target of revenue may be revised downward during the Dubai parleys. Pakistan’s official experts delegation is to leave on Sunday for Dubai to discuss the second review of the IMF loans and third review of the ongoing fiscal would also be discussed in detail.
The policy talks would start from May 9 and end by May 11, a senior official at Ministry of Finance told The News.
Secretary Finance Salman Siddique will head the delegation comprising Additional Secretary (External Finance) Asif Bajwa, Joint Secretary External Finance Mumtaz Malik, Joint secretary Budget Talib Baloch, Economic Advisor to Finance Ministry Zameer Ahmad and Deputy Economic Advisor Zafarul Hasan and Section Officer (External Finance) Saeed Ahmad.
Two officials of FBR Afzal Kiani, member Tax Policy and reforms and Mumtaz Haider Rizvi, Member Fiscal Research will also be included in the delegation. Some officials from State Bank of Pakistan would also join the delegation in Dubai.
Advisor to Prime Minister on Finance Shaukat Tarin, FBR Chairman Ahmad Waqar and Governor State Bank of Pakistan will join the talks on policy level on May 9.
“Pakistan is at ease as it has met all the targets set for the second review of the IMF loan and third review of the ongoing fiscal,” Asif Bajwa spokesman of the Ministry of Finance told The News.
The official sources said that Fund might express its fear that Pakistan may not achieve the fiscal deficit target of 4.2 per cent of GDP keeping in view the massive shortfall in tax revenue collection.
The gap between tax revenue and overall revenue target has widened to large extent that has put fiscal deficit target of 4.2 percent of GDP in the red zone. Even the non-tax revenue target of Rs90 to Rs95 billion to be collected through Petroleum Development Levy will not be enough to bridge the massive shortfall.
However, the economic managers of the country are optimistic to attain the most crucial budget deficit target of 4.2 percent of the GDP. “Yes it is difficult task of attaining the fiscal deficit target of 4.2 percent budget deficit of the GDP by June 30 in the wake of massive shortfall in tax revenue. But Ministry of Finance will achieve the target through non-tax revenue means,” Asif Bajwa spokesman of Finance Ministry said.
However some of the officials are of the view that the government may get the dividends of the OGDCL and other public sector entities before time and also get some of the amount from profits of the State bank of Pakistan to achieve the fiscal deficit target.
“And in case the said target fiscal deficit is not materialized by the government, then the future tranches after June 30, 2009 under 23 months Stand By Arrangement loan of $7.6 billion may be delayed exposing the country’s economy to more crises,” the official said.
During the Dubai talks, Pakistan’s budget will be fine tuned as IMF under the 23-months $ 7.6 billion bailout package has already fixed the main targets for next fiscal 2009-10 that include the budget deficit target of 3.3 percent (Rs525 billion), expenditure target of Rs3.064 trillion (current expenditure Rs2.435 trillion, debt servicing Rs751 billion, defence expenditure Rs380 billion and development expenditure Rs 616 billion).
The revenue target for 2009-2010 was earlier agreed with IMF at Rs2.521 trillion including tax revenue of Rs1.879 trillion and non-tax revenue Rs642 billion.
