Published On: Sat, Apr 13th, 2019
Published in Category: Karachi

Hard decisions expected in upcoming budget on IMF’s instructions: PBIF

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Karachi: “As talks between government and International Monetary Fund are in final stages , it is very much likely that the government may take some tough decisions in next budget on the suggestion of IMF”

This was said by the President Pakistan Businessmen and Intellectuals Forum (PBIF) and former minister Mian Zahid Hussain, during a meeting of business community at his office on Friday.

He said that a staff level mission from IMF will be visiting Pakistan this month to finalize the Memorandum of Economic and Financial Policies (MEFP), which will be presented to IMF board and the remaining process for the bailout package will most likely to conclude before the end of the current fiscal year.

The business leader said that IMF’s condition of generation 34% revenue (PKR. 5.4 Trillions) is not looking achievable for the current fiscal year 2018-19 though FBR has proposed government to fix its revenue target in the range of PKR. 5.1 trillion in the upcoming budget against revised estimates of PKR. 4.1 trillion for the ongoing fiscal year.

He said that apart from revenue, curtailing of primary balance within the desired limits will be the biggest challenge for the government to strike the staff level agreement with the IMF for the bailout package. “Before the meeting between finance minister Asad Umar and IMF’s officials in Washington DC on the next bailout program, in a report:“World Economic Outlook (WEO), Growth Slowdown, Precarious Recovery” IMF had projected a sharp decline in GDP growth rate for Pakistan from 5.2% in 2018 to 2.9% in 2019 and a further decline to 2.8 in 2020. It projected a sharp rise in inflation from 3.9% in 2018 to 7.6pc in 2019”, her added .

He said that the report further states that in the absence of further adjustment policies in Pakistan, growth is projected to remain subdued at about 2.5%, with continued external and fiscal imbalances weighing on confidence of the economy. Gross general debt to GDP ratio was estimated at 77% during 2018-19, 79.1% in Fiscal year 2019-20, 81% in Fiscal year 2020-21 and 82.6% in Fiscal year 2021-22. It is then further expected to rise up to 85.6 in the fiscal year 2023-24. The IMF had also estimated Pakistan’s primary deficit at 2.1% in Fiscal year 2018-19 and came down to 1.7% during this fiscal year before rising again to 2.2% in Fiscal year 2019-20.

The former minister said that although Pakistan’s economic condition looks bleak at the moment but through substantial efforts and wide fiscal reforms by the Government, in a short time the economy can stabilize. Because IMF report has focused primarily on the macroeconomic stabilization in response to financial crises, and less emphasis has been placed on reforms to foster long-term growth and development.  The new economic policy should be based on possible down turns and balancing growth and sustainability objectives while also putting more emphasis on reforms to adapt to a fast changing global economy. The reforms will require inclusive and growth friendly budget re-composition to upgrade tax, social spending, and active labour market policies, as well as investment in infrastructure for better public service delivery. Mian Zahid mentions that, it’s inevitable to address multilateral issues, including corporate taxation, climate change, and corruption to achieve sustainable economic growth in Pakistan.

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