Following discussions in connection with the first review of the $3 billion stand-by agreement, the visiting team of the International Monetary Fund (IMF) and the Pakistani authorities will create a policy document for future action today (Wednesday).
The IMF delegation is expected to depart Islamabad later today, with hopes that the dialogue would be fruitful. The executive board will decide whether to release the remaining $710 million in a single tranche early the next month.
According to reports, the IMF raised concerns during the discussions about the government's inability to address the circular debt issue, which is a problem that is thought to be essential to lowering the budget deficit, as well as other issues pertaining to the gas and electricity industries.
However, the IMF is not happy with Pakistan's stance on external financing, which is required to meet financial needs in the face of low revenue production. External financing is money given by friendly countries and international financial institutions in the form of loans.
Furthermore, the sources add that the Washington-based organization wants Pakistan to update its fiscal framework, which could lead to further increases in the price of gas and electricity because the government has not been able to broaden its tax base in order to increase revenue collection.
The International Monetary Fund (IMF) was against the establishment of the Special Investment Facilitation Council (SIFC), according to Deputy Chairman of the Planning Commission Dr. Jahanzeb Khan, who informed reporters on Tuesday. The IMF believes that the establishment of the SIFC will benefit a select group of investors.
Khan claims that the IMF team demanded "transparency and accountability" and questioned the necessity of creating the SIFC.
However, Pakistan had promised the IMF that it would adhere to austerity and cut back on government spending in order to minimize the budget deficit, according to Caretaker Finance Minister Shamshad Akhtar on Monday.
Following the start of policy-level negotiations between the government and the IMF as part of the ongoing first review of the $3 billion stand-by arrangement, she shared her opinions with in an informal conversation.
In addition, Akhtar pledged that the government would not add to the burden of the people and that the revenue collection target would remain at Rs9,415 billion. This was a clear allusion to the recent increases in gas and power prices as well as the IMF's demand that the tax base be expanded in order to increase tax revenue.
The agreement is that the crippling interest rates will not be lowered to the desired levels anytime soon, even though a rate decrease may occur following the next meeting of the Monetary Policy Committee of the State Bank of Pakistan.
In addition, the government has already increased gas and electricity prices, which satisfies a major IMF demand and tackles the circular debt problem.
Investors believe that the privatization of state-owned enterprises (SOEs) that are losing money will pick up steam after years of inaction. This will help drive up stock prices, which are still cheap in comparison to their 2017 highs, even with the market experiencing a record-breaking surge.
Comments
Post a Comment