Talks with IMF on seventh tranche to begin today

ISLAMABAD: Pakistan seems confident of obtaining the seventh tranche worth $550 million from the IMF as talks between two sides commence today (Tuesday) in Dubai and the Fund will release the next installment after slapping fresh ‘prior actions’, it is learnt.
The IMF staff is going to place tough conditions for the second half (Jan-June) period of the current fiscal year because net dollar inflows from Washington’s Breton Wood Institution will now start pouring in for Islamabad’s struggling economy since signing the latest loan agreement.
Earlier, the IMF had provided almost $3.2 billion to Pakistan under existing EFF arrangement but this money was largely used for paying back the previous loans obtained by Pakistan during the tenure of PPP government.
The IMF will raise questions about reforms in the energy sector, the monster of circular debt and the overall loose fiscal position because of FBR’s revenue shortfall, higher expenditures and curtailing public investment that would ultimately compromise growth prospects of the country.
The IMF, the sources said, might get tough on the issue of rising circular debt and government’s inability to expand the narrow tax base. The FBR’s revenue target, which was already revised downward from Rs2810 billion to Rs2756 billion, was a hot topic between the two sides.
The slow pace of privatisation and autonomy for the State Bank of Pakistan by amending the existing law will be problematic area for Pakistan’s economic managers.
Although the Pakistani side doesn’t agree on revising downward the macroeconomic targets for the time being but the IMF will insist upon revising downward the real GDP growth target from 5.1 percent to 4 percent for the ongoing fiscal year as well as increase in the current account deficit. On inflation, both sides agree on the downward trend and it is expected that it will come down to 6 percent on average for the whole fiscal year.
On GDP growth target of 5.1 percent, the Pakistani side argues that the agriculture and industrial sector have performed well in the first half of the current fiscal and they will achieve their desired target. But the IMF insists that the GDP growth target of 5.1 percent is highly unlikely in the wake of negative impacts of recent floods on agriculture sector and slowing down of Large Scale Manufacturing (LSM) growth so far in the current fiscal year.
Last year’s final GDP growth figures are to be revised downward from 4.14 percent to 3.3 to 3.4 percent but it would be impossible to touch the desired level of 5.1 percent growth in the ongoing fiscal year.
Despite reduction in oil import bill by $4 billion, the current account deficit is estimated to surge to $4 billion in the current fiscal year after witnessing stagnant growth in exports.
“We have met all benchmark criteria for end December 2014,” official sources in the finance ministry confirmed to The News here on Monday.
Pakistan’s delegation led by secretary finance Dr Waqar Masood has reached Dubai for the first round of technical talks with the IMF’s review mission headed by Jeffery Franks. It will be the last review conducted by Jeffry Franks, as he will be replaced after the completion of sixth review.