The International Monetary Fund (IMF) has rejected the rumors circulating in the Pakistani media that the IMF has suggested devaluation in the value of Pakistani currency. IMF’s Head of Mission Herald Finger said the Fund didn’t suggest any such measures.
Talking to reporters, Herald Finger said Pakistan decided about the value of its currency keeping in view the supply and demand of the US dollar in the country and the IMF had not suggested Pakistan to devalue its currency. Responding to a question, Mr Finger said based on the IMF model Pakistan’s real exchange rate was overvalued to the extent of 5 to 20 per cent depending on different scenarios.
About the tax revenues, Finger said the government failed to meet its target by Rs 40 billion in the first three months of the financial year and the officials had assured the Fund of taking measures to meet the target in the coming months.
Finger said the government understood better how they could improve the tax revenue. The IMF had however suggested the government to increase its tax income so that the funds can be available for development, he commented.
He said Pakistan faced Rs 40 billion revenue shortfall in the first quarter. “We worked out with authorities the strategy to meet fiscal deficit target and the government will take measures of that amount to bridge the gap.”
Responding to questions, he said the government had to finalise the measures in a few weeks. He agreed with a questioner that these additional measures had now become “prior action” before going into the next quarterly review.
He said the question of an increase in power tariff was not discussed but confirmed that the circular debt had gone up to Rs 661 billion including payable stocks of Rs 326 billion and Rs 335 billion parked consistently with the power holding company.
The IMF had previously put the debt at about Rs 615 billion including payable stocks at Rs 280 billion.
The mission chief, however, said the authorities had met the quarterly target on power sector’s recoveries. He said some recent gains in large-scale manufacturing, pick-up in construction activities, decline in international oil prices, the China-Pakistan Economic Corridor and better foreign remittances were signs of improved economic activity but generally the investment climate had a long way to go as private sector credit had not gained momentum.
He did not agree with a perception that the government had built foreign exchange reserves through foreign borrowings and said lower oil prices had provided a cushion to the authorities to build reserves through market operations. He, however, agreed that sustainability of the reserves had some structural challenges because of exports and global conditions.
The IMF resident representative, Mr Mirzoev, said the Fund’s global methodology recognised the government’s expenditures and revenue numbers in the fiscal deficit and the circular debt amount could not be considered a part of deficit unless they actually get transferred to the budget.
Asked if the IMF loans could lead to Pakistan’s external vulnerabilities and compromise on its nuclear assets, Mr Finger said there was absolutely no link between Pakistan’s nuclear programme and IMF programme. In fact, he added, the IMF loans were resulting in reduced debt-to-GDP ratio and increasing foreign exchange reserves that would enable the country to absorb shocks and reduce its vulnerabilities.