Pakistan, IMF technical talks underway

ISLAMABAD: Technical talks between Pakistan and the International Monetary Fund (IMF) are underway for finalising blueprint and salient features of the upcoming budget for 2020-21 in post COVID-19 pandemic situation.

Top officials said that the IMF has also linked resumption of Extended Fund Facility (EFF) programme with approval of the next budget for 2020-21 in compliance with broader framework on which both sides will agree as consequence of ongoing technical talks. The technical talks are underway through virtual engagements with the IMF team based in Washington DC.

The IMF has estimated that Pakistan requires gross external financing of $29.3 billion in the next budget against $25 billion for outgoing fiscal year 2019-20. It indicates that Islamabad

will have to increase its reliance on foreign borrowing to meet its financing requirements in case the country remains unable to lure non-debt creating dollar inflows that becomes really difficult after outbreak of coronavirus pandemic. The direction of the upcoming budget will have to be aligned with the structural reforms envisaged under $6 billion EFF programme. The IMF has agreed with Pakistan for revising all macroeconomic and fiscal frameworks in post COVID-19 situation so the revival of EFF requires broader agreement after emerging new realities on the economic fronts.

Now the completion of second review under EFF and release of third tranche worth $450 million will be finalised once the budget will be approved by the National Assembly by end of June 2020. It is not yet decided whether the second and third reviews will be clubbed or approved by the Fund’s Executive Board separately.

“The technical level talks have already been underway,” said a top official of the Finance Division and explained that these technical talks could only be converted into review talks when the budget would be approved by the Parliament.

The official said that the technical talks were aimed at evolving consensus on macroeconomic and fiscal framework where some numbers were quite crucial such as the budget deficit, primary deficit, FBR’s revenue collection target and major expenditures heads as well as structural reforms related to autonomy of the central banks, tackling of monster of circular debt of power sector and bringing reforms into taxation machinery.

The IMF has given FBR’s tax collection target of Rs5,101 billion for next budget against revised target of Rs3,908 billion for the outgoing fiscal year, indicating that it requires about 31 percent growth for materialising its desired target.