Govt makes stabilisation plan to get IMF package

ISLAMABAD: The PTI-led government has made home-grown stabilisation and growth framework strategy for undertaking fiscal adjustments of Rs1,000 billion or 2.6 percent of GDP for slashing the budget deficit to 4 percent of GDP in first two years up to 2019-20 to secure the IMF bailout package.

The Ministry of Finance has prepared a highly ambitious plan titled ‘Pakistan’s Economic Stabilisation and Growth Framework’ under which the budget deficit would be brought down from 6.6 percent of GDP in last fiscal to 4 percent and cutting down the current account deficit by 50 percent bringing down from $18 billion to $9 billion under three-year programme of the IMF.

The fiscal adjustments of 2.6 percent of GDP will translate into Rs988 billion as the government will have to either generate additional revenues or cut down the expenditure to bring the deficit at desired level of 4 percent of GDP.

The CPI based inflation is expected to go up and can cross double digits during the first two years of stabilisation programme. The government prepared and shared its framework to bring down borrowing from State Bank of Pakistan (SBP) which had climbed to Rs5.5 trillion.

“This home-grown three-year strategy has been dispatched to IMF for becoming the basis of the next bailout package as the policy level discussions will be held after Christmas and New Year holidays with possibility of holding next round of parleys after first week of January 2019,” official sources confirmed to The News here on Friday.

Pakistan’s stabilisation and growth framework strategy, the official sources said, has been finalised in consultation with all the stakeholders under which the real GDP growth will come down in first two years in the ongoing fiscal year and next fiscal year but it will start picking and can touch 5 to 5.5 percent in 2020-21.

The GDP growth, the sources said, could hardly cross 4.1 percent of GDP in ongoing fiscal year and it was envisaged to go up to 4.5 to 4.7 percent in next financial year 2019-20. When the stabilisation plan will be implemented, it will result in slowing down of the GDP growth in first two years of implementation period.

The IMF considers reduction in the budget deficit as “sacrosanct” target so slashing the budget deficit will be the major performance criteria of any possible bailout package. The government has prepared three-year plan under which the budget deficit will be brought down below 4 percent of GDP during the implementation period.

About the budget deficit that crossed 6.7 percent of GDP in last fiscal year, the PTI-led government envisaged to reduce budget deficit by 1.3 percent of GDP every year and bring the deficit at desired level of 4 percent within two years of stabilisation plan.

On FBR’s tax collection target, the government envisaged to jack up tax to GDP ratio by one percent of GDP every year in the next three years period. The FBR had failed to achieve its desired target for broadening of tax base and the FBR was preparing new strategy in collaboration with the World Bank.