ISLAMABAD – The government is headed towards troubled waters, as the International Monetary Fund (IMF) is unlikely to grant it the desired nine-month extension in the already suspended $11.3 billion standby arrangement programme.
Informed source said the programme had an in-built mechanism for an extension of up to three months, but the extension of another six months seems unlikely to be granted, as it construes that the government is not prepared to implement the reformed general sales tax until the beginning of the next fiscal year.
The source said IMF was considerate of the government’s woes over the difficult revenue and power sector reforms, but it was perturbed that it had even not complied on simpler conditions like granting autonomy to the State Bank, decreasing its borrowing from the central bank, installing new boards for distribution and generation companies and curbing the deficit of state-owned enterprises in the commodity operations.
The government was using diplomatic channels to get a favourable decision from the IMF but some European states having representation on the board opine that there was no use and need to grant further concessions to Pakistan. The government had already been warned that de-linking from the IMF programme would result in the suspension of budgetary financing of an estimated Rs 185.8 billion from multilateral and bilateral donors.
The government had assured its development partners at the recently held Pakistan Development Forum that the fiscal deficit would be maintained at 4.7 percent of GDP. The earlier fiscal deficit estimate was 4 percent of the GDP and donors had accepted the 0.7 percent increase in estimates, considering biblical floods that caused losses of $10 billion.
The suspension of IMF programme since May, coupled with a halt in aid flows from donors and additional expenses due to floods are projected to raise the current financial year’s fiscal deficit to 7.5 percent of the GDP or Rs 1.28 trillion. Under these pressures, the government has already borrowed Rs 328 billion from the central bank in addition to Rs 88 billion generated through the sales of treasury bills to commercial banks by mid-December.
Government sources said it would not be in a position to launch the planned Euro 500 million bonds without IMF, and even European states were in the grip of severe financial crisis. The revenue target of the Federal Board Revenue for the current financial year projected at Rs 1,667 billion has been already revised downward to Rs 1,655 billion due to the precarious energy supply situation in the country.
The latest estimate points out a further decline of Rs 80 billion in revenue collection during the current fiscal. The FBR is likely to come up with a revised revenue target in the next few weeks.
