After a delay in the release of $300 million from the US under the head of the Coalition Support Fund (CSF), the government is facing a hard time pacifying the International Monetary Fund (IMF), as the fiscal deficit is expected to rise to six percent of the gross domestic product (GDP) during the current fiscal year.
An official source said the US had informed the government that the release of $300 million of CSF dues was not possible before the end of this fiscal year.
The government had earlier directed its Ambassador in Washington, Hussain Haqqani to work to get the funds released.
Pakistan had assured the IMF that the fiscal deficit would be kept below 5.3 per cent of the GDP during the current fiscal year and the same was an integral condition for the revival of the $11.3 billion standby arrangement that stands suspended since May 2010. Pakistan wants the revival of the programme to maintain its foreign exchange reserves at $17 billion during the repayment period that starts this calendar year. Continuation of the IMF programme is also essential to maintain foreign inflows from other multilateral and bilateral donors.
Pakistan estimates its CSF dues at $3.5 billion by June 30, of which it considers $1.8 billion having been matured. By December 31, 2010, outstanding dues amounted to $500 million, of which the case for the payment of $300 million was mature and the government had anticipated the payment before the end of this fiscal year.
However, the delay would increase the fiscal deficit by 0.2 per cent of the GDP. The government was claiming that the fiscal deficit would remain at 5.3 per cent in the current fiscal year as it had based its calculation on exclusion of the payment of Rs120 billion made for last fiscal year’s power sector circular debt, which was paid during the ongoing fiscal year.
The fiscal deficit was projected at 5.9 per cent of GDP after including both the accounts in the current fiscal year.
Spokesman for the finance minister Rana Assad Amin confirmed that dues were not likely to be received during the current fiscal year.
“Our case is mature. They could send it in two days or it could take two months. It all depends on them (US)”.
However, he said the fiscal deficit would be 5.3 per cent of the GDP if CSF dues were not released by June 30, adding that the deficit target without CSF dues was 5.1 percent
of the GDP.
Commenting on revenue recovery, he said the FBR would have to collect more than Rs100 billion in the last three remaining days of the current fiscal year, as it had so far managed to collecting Rs1590 billion. When asked about exchangeable bonds of Oil and Gas Development Company Limited (OGDCL), he said the Cabinet Committee on Privatisation would decide on the matter. An official source said the government had been advised to drop the sale of OGDCL’s exchangeable bonds by foreign investors due to the crisis in the international market over US and Greek debt issues.
