Pakistan, IMF start talks for 7th review under EFF

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have started talks for the seventh review under the $6.64 billion extended fund facility (EFF) in Dubai where both the sides will make efforts to reach an agreement on the salient features of the next 2015/16 budget, The News learnt on Saturday.
With an expected federal tax revenue target of Rs3.3 trillion for the upcoming budget, Pakistan will inform the IMF’s review mission that they will maintain the budget deficit at around 4.1 percent of the gross domestic product (GDP) for the next fiscal year by ensuring fiscal discipline, sources said.
Pakistan’s economic managers are making desperate efforts to keep the budget deficit in the range of 5.2 to 5.3 percent for the fiscal year, ending on June 30, 2015 against the desired target of 4.9 percent
In the wake of massive revenue shortfall being faced by the Federal Board of Revenue (FBR) in achieving twice revised revenue collection target of Rs2,691 billion for 2014/15, the economic managers expect that the FBR’s collection will stand at around Rs2,600 billion by June-end this year. Despite holding huge refund amounts of both sales and income taxes – some estimates suggest startling figures – the FBR had miserably failed to demonstrate impressive performance in achieving its initially-envisaged target of Rs2,810 billion on eve of the last 2014/15 budget.
During the ongoing Pak-IMF review talks, there are two rounds. The first round is of technical level, which is already underway and the second round of policy level talks will commence from May 6 to 9 in Dubai. Finance Minister Ishaq Dar, who is currently in Baku for the annual meeting of Asian Development Bank, will lead Pakistan’s team in the policy level talks with the IMF.
“Finance Minister Ishaq Dar, Secretary Finance Dr Waqar Masood, Governor SBP (State Bank of Pakistan) Ashraf Mahmood Wathra and Chairman FBR Tariq Bajwa will participate in the policy level talks to finalise the 7th review, which will become the basis for the release of the next tranche worth $550 million after the approval of the IMF’s executive board by late June or early July,” a source said. Economists, however, argue that the time has come for speaking truth and the reality shows that Pakistan’s economy is heading towards deflation, which requires increased public investments to jumpstart the sluggish economic activities.
With expected low GDP growth and low inflation in the outgoing fiscal year, the economists said they are closely watching the upcoming GDP growth figures for this fiscal year as any alleged manipulation with the growth figure could result into misleading the whole economic scenario.