LAHORE/ISLAMABAD – The International Monetary Fund (IMF) asked Pakistan once again on Tuesday to move forward on the Reformed General Sales Tax (RGST) and demanded full implementation of all conditions related to the current standby programme before a new one could be worked out, as the US also pressed for the implementation of major structural reforms, without which it said the country would not attain economic stability despite support from Washington and international financial institutions.
According to a private TV channel, which quoted sources in the Finance Ministry, the IMF refused to budge on its demands that Pakistan reform its taxation system and end subsidies on utilities. The official sources said that discussions with the IMF and the World Bank remained inconclusive, so the Pakistani delegation would stay in Washington for another two days for further talks and return on April 22.
Meanwhile, a joint statement issued after a meeting of the US-Pakistan Strategic Dialogue Working Group on Economics and Finance said, “Major structural reforms, including in the energy sector, remain necessary to help create the conditions for strong growth and employment creation.”
An official source privy to talks in Washington said Pakistan had sought the US’ help to secure a new bailout package from the IMF, but the fund was reluctant on a new programme until the government implemented the economic reforms it wanted to see.
Failure to grant autonomy to the State Bank of Pakistan and automatic passing on of the power tariff determined by the National Electric Power Regulatory Authority (NEPRA) to the consumers emerged as the major stumbling blocks with the IMF. The international financial body sees the Pakistan’s failure to implement the reforms as a lack of seriousness on the government’s part and said it might look for loopholes to evade implementation of other tough economic reforms.
Pakistan wants another IMF programme to retain the confidence of the international community and to attract foreign investment. It will also help to maintain foreign exchange reserves, which might come under pressure after repayment to the IMF begins in October this year. The commodity boom in international markets has helped Pakistan earn $2 billion per month while remittances have also risen to $1 billion per month.
This has helped Pakistan achieve a current account surplus of $99 million during the first nine months of the current fiscal year. The two sides focused on how to strengthen the foundations of the economy to expand employment opportunities and move towards self-sufficiency and away from donor dependency.
“The US recognised measures that Pakistan implemented in recent months to expand revenue collection and control this year’s fiscal deficit, and encouraged the government of Pakistan to continue efforts to strengthen the sustainability of its fiscal framework over time and to build broad consensus for these measures,” the statement said.
Finance Minister Abdul Hafeez Shaikh, US Deputy Secretary of State for Management and Resources Thomas Nides, National Security Staff Senior Director for International Economics David Lipton, and Assistant Secretary of the Treasury Charles Collyns convened the working group under the US-Pakistan Strategic Dialogue to review the state of Pakistan’s economy, its reform efforts and ongoing flood recovery programs.
The finance minister briefed the US officials on positive developments in Pakistan’s economy and said the current account had benefited from increasing exports and remittances. He presented Pakistan’s growth strategy intended to enable a sustained period of increased growth. Underpinning that strategy, he indicated Pakistan plans to develop its 2011-12 budget, based on national consensus, with measures to continue progress on sustainability and encourage international investors and partners.
The US committed its continued support for Pakistan in the implementation of the reforms, but said Pakistan needed to find the means to return the energy sector to financial solvency.
“The US recognised measures that Pakistan implemented in recent months to expand revenue collection and control this year’s fiscal deficit, and encouraged the government of Pakistan to continue efforts to strengthen the sustainability of its fiscal framework over time and to build broad consensus for these measures,” the statement said.
Finance Minister Abdul Hafeez Shaikh, US Deputy Secretary of State for Management and Resources Thomas Nides, National Security Staff Senior Director for International Economics David Lipton, and Assistant Secretary of the Treasury Charles Collyns convened the working group under the US-Pakistan Strategic Dialogue to review the state of Pakistan’s economy, its reform efforts and ongoing flood recovery programs.
The finance minister briefed the US officials on positive developments in Pakistan’s economy and said the current account had benefited from increasing exports and remittances. He presented Pakistan’s growth strategy intended to enable a sustained period of increased growth. Underpinning that strategy, he indicated Pakistan plans to develop its 2011-12 budget, based on national consensus, with measures to continue progress on sustainability and encourage international investors and partners. The US committed its continued support for Pakistan in the implementation of the reforms, but said Pakistan needed to find the means to return the energy sector to financial solvency.
