Pakistan-IMF successfully complete second review under IMF programme

ISLAMABAD, Feb 9 (APP): Pakistan and IMF have successfully concluded the second review under the 3-year (Extended Fund Facility) EFF programme for an amount of $ 6.64 billion. This will enable IMF to go to their Board for the release of third tranche of about $ 550 million, Finance Minister Senator Muhammad Ishaq Dar said in a joint press conference with IMF Chief, Jeffery Franks in Dubai, according to message received here Sunday.
Senator Ishaq Dar said this is an indicative of government’s commitment in implementing structural reforms in the areas of  taxation, energy, monetary and financial sectors and public sector enterprises.
Based on the increase in growth in the first quarter recorded at over 5 percent, the Minister said the growth at 2.8 percent, estimated in the first review, has been scaled upto 3.1 percent by the IMF on account of improved economic activity.
He said LSM has been the main contributor registering a growth at 6.8 percent while services sector also posted a growth of 5.7 percent.
Based on the moderate rate of inflation of 7.9% during January,2014, it is expected that the inflation for the entire fiscal year would remain within a single digit, however, IMF has projected the same at 10%.
He said Fiscal sector exhibited strong performance during the first half of the year. Against the target of 3.5%, the actual fiscal deficit was 2.2% of GDP.
Stringent control on spending and implementation of austerity measures as announced in the Budget have helped in containing the fiscal deficit, he added.
He said that FBR revenue collection for the first half recorded an increase of over 17% i.e. Rs 1031 billion against the target of Rs 1029 billion.
Tax administration reforms are expected to gradually deliver further improvements in revenue collections. An initiative to incorporate new taxpayers into the income tax net is moving ahead as planned, Ishaq Dar added.
The recently approved investment incentive package, he said, seeks to foster investment in key productive sectors and provide incentives for taxpayers to voluntarily enter the tax net.
“ We remain committed to our plan to broaden the tax net through the elimination of most tax exemptions and loopholes granted through Statutory Regulatory Orders (SROs),” he added.
The Senator said that SBP will continue its prudent stance on monetary policy as needed to help accumulate reserves and maintain price stability and added that the target of Net Domestic Asset (NDA) of SBP for end-December 2013 was met and the monetary programme remains on track.
The IMF commended SBP’s efforts in meeting the end-December 2013 Net International Reserve (NIR) target and expressed satisfaction with current progress in meeting the end March target, despite an ambitious reserve accumulation path.
He said that “ PML(N) government gave autonomy to SBP in early 90s, and we intend to enhance central bank independence by taking necessary measures.”
It will improve monetary policy making and help in pursuing price stability as a primary objective, he added.
The Minister said IMF also acknowledged the stability of the banking sector in Pakistan and there was an agreement to enhance the regulatory and supervisory framework to further strengthen the financial stability.
“We are implementing our recently announced Power Policy to ensure improvements in collections, rationalization of costly and poorly targeted subsidies, strengthening governance and regulatory and increasing energy supply. Reforms in the electricity sector are bearing fruit with energy shortages and unscheduled load-shedding declining,” he said.
Ishaq Dar said the government has already undertaken key reforms including the amendments to the Pakistan Penal Code 1860, enacted by an Ordinance, hiring of an internationally recognized  professional audit firm to conduct a technical and financial audit of the system to identify energy sector payables to stop the buildup of circular debt.
He said Central Power Purchasing Agency (CPPA) has been set up to improve the cash flows of the power sector. Revenue-based load shedding in all remaining electricity distribution companies has been initiated to curtail leakage from the system.
He said the import of LNG is being finalized to mitigate the gas shortages by the end of 2014 while Gas (Theft Control and Recovery) Ordinance 2014 has been promulgated for control of losses in the system.
“ As planned, we are moving ahead with privatization of PSEs through capital market transactions and strategic partnership. We are hoping to achieve the first phase of capital market transaction by the end of the current financial year,” he added.
He said disbursement procedures for Income Support Programme to ensure timely release and distributions of funds to the vulnerable sections of the society is being streamlined.
The current account deficit for first quarter was higher than  the target reflecting strong aggregate demand, emanating from higher investmentrequirements as reflected in higher machinery imports.  The deficit was also affected due to lower capital and financial inflows, he added.
He said working through this programme requires exceptional discipline and diligence.” It is a team effort. We have achieved negotiation of the Programme and second review successfully,” he added.
The Minister said “our challenges remain numerous but we are determined that we will remain on track in achieving the objectives of the programme in line with PML(N)’s 2013 election manifesto.”
“Our policies have already changed the economic direction of the country and has put our economy on the road of recovery, stability and economic prosperity,” the Minister said and thanked Jeffery Franks, the Mission Chief and his team, for an outstanding job they have done in conducting the second review within a tight time schedule. (Courtesy: APP)