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September 18, 2019

IMF assured of accelerating privatisation

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September 18, 2019

ISLAMABAD: The Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh Tuesday said the International Monetary Fund (IMF) has been assured that the process of privatisation will be accelerated and targets of economic development will be achieved.

This he said while addressing a press briefing of Pakistan and the IMF in the presence of IMF’s Mission Chief Ernesto Ramirez-Rigo, Minister for Economic Affairs Hammad Azhar, Minister for Planning Khusro Bakhtyar, SBP Governor Reza Baqir, FBR Chairman Shabbar Zaidi, and whole teams of both the Ministry of Finance and the IMF side. Shaikh said the IMF was an important partner of Pakistan and they are committed to undertake key reforms and fulfil all targets under the IMF programme related to public finance, achieving macro-economic stability. He said this dialogue with the IMF is an ongoing process and would continue in the future.

The IMF Director of the Middle East and Central Asia Department, Jihad Azour, ruled out the possibility of re-adjustments of the envisaged targets, and said thereis no need of re-setting the targets when the programme had just started almost three months ago. “I don’t think there is a need of re-setting the targets at this early stage as the first review of the IMF programme will take place by end October or early November. Now it is time to keep focus on the implementation which will help achieve stabilisation and growth. In return it will result into achieving inclusive growth and creation of job opportunities. This programme is not aimed at adjustments only but structural reforms are the objectives of home-grown programme for which the IMF extended its support,” Jihad Azour said. When asked about recent developments in the context of attacks on Saudi oil reserves, the visiting IMF director said they are reassessing recent developments taking place in the region as it’s too early to make any judgment. He said there is volatility in the market for oil import dependent countries so they might have to set right the direction of subsidies. The IMF director said the IMF programme had just started almost three months ago and the real situation would come before us after two months as the review of the programme would take place by end October or early November this year. He said the exchange rate was moving towards market based and monetary tightening was done to stabilise the economy.

The IMF Mission Chief Ernesto Ramirez-Rigo said it was their expectation to implement the programme targets as it would help cementing the gains and would build business confidence. “We will not revise any targets as the FBR on domestic front of General Sales Tax achieved 50 percent growth while overall total domestic revenue growth in shape of inland revenue achieved 30 percent growth in first two months,” he added.

Jihad Azour said the IMF programme is dependent upon assistance of other partners as the Fund is providing $6 billion while other international financial institutions (IFIs) would provide $30 billion during the programme period. When asked about Chinese loan, he replied that like other bilateral partners, China also contributed in terms of rollover of its outstanding bilateral loans.

When asked about the possibility of hiking electricity tariff, he said there are shortages of energy supply and there is also the issue of circular debt. The institutional reforms, he said, are necessary to undertake to grow at faster pace. He said the FBR targets would not be revised as they have seen impressive growth in the first two months. The FBR is pursuing reforms on automation and efforts are underway to collect taxes with shared burden. He said when there are adjustments it causes social pressures. The first good step, he said, taken by the government is to move towards social protection. He said that there were large imbalances on economic front and time is needed to implement the IMF programme. When asked about similarities of IMF in case of Pakistan and Egypt, he said they are two different countries and their outcomes would also be different from each other.

Meanwhile, parliamentarians expressed serious concerns to the visiting IMF team over “unrealistic targets” envisaged under the Fund conditions, saying the programme has resulted into stagflation in terms of hiking prices and halting economic activities. They asked the IMF to re-adjust the targets, especially on account of FBR annual collection of Rs5,550 billion, which requires a 44 percent growth to achieve the desired results.

The visiting team led by Jihad Azour participated during the proceedings of in-camera meeting of the National Assembly’s Standing Committee on Finance and Revenue held under the chairmanship of Asad Umar here at the Parliament House on Tuesday. The members belonging to opposition benches termed the IMF conditions and targets totally unrealistic and asked the Fund to re-adjust them in order to align with ground realities. The parliamentarians criticised the policy of devaluation, hiking policy rates and fixing unrealistic fiscal target that is tantamount to putting more people into trap of poverty and unemployment.

The chair allocated for Adviser to PM on Finance Dr Abdul Hafeez Shaikh remained vacant as he did not turn up into the meeting probably because of the federal cabinet meeting. Even parliamentarians belonging to treasury benches expressed concerns over the rising inflation and lowering of the GDP growth resulting into increasing poverty and unemployment. Nafeesa Shah of the PPP criticised the IMF for linking FATF conditionalities and China Pakistan Economic Corridor related issues into programme and termed them against national sovereignty of Pakistan.

The Chairman of Standing Committee on Finance Asad Umar told journalists outside the committee room of the Parliament House after the meeting that the IMF team expressed “satisfaction” on overall performance of the government in first two months of the current fiscal year. He said it is yet to be seen how the IMF programme proceeds in months ahead, but so far the IMF team is of the view that revenue collection of the FBR is showing signs of improvement.

To another query regarding shattering of the basis of IMF programme whereby the primary deficit exceeded and stood at 3.5 percent of GDP in the last fiscal year, Asad Umar replied that the IMF talked about performance achieved in the first two months and stated that “the programme is moving in the right direction”. Ayesha Ghous Pasha from the PML-N said the IMF programme is resulting into laying off one million people and is bound to create a further three million layoffs if the programme is not revised. This, she said would push over 7 million people into the poverty trap.

PML-N MNA Ahsan Iqbal told the IMF team that the rising current account deficit (CAD) is not the structural issue of Pakistan’s economy, but it went up in the context of pressing requirement for completion of early harvest projects of the CPEC.

While referring to the State Bank of Pakistan report, he said the CAD was slashed down by 52 percent after completion of CPEC projects. He said it was one time phenomenon that the CAD had touched peak in fiscal year 2017-18. “With the IMF conditions, emergency brakes were applied to half of the economic activities, resulting into rising inflation and increasing miseries of the people of Pakistan,” he said, and added a wrong prescription would result into wrong policy actions.

Qaiser Sheikh of the PML-N said it was breach of privilege of parliament that the government informed on the floor of the House that the budget deficit stood at 7.1 percent of GDP on June 11, 2019, but on June 30, it ended up at 8.9 percent of GDP. “There is a need to ascertain why Rs800 billion were added into the deficit in just 20 days,” he added.