Pakistan continues talks with IMF on flood expenditures

Mehtab Haider
Thursday, Nov 24, 2022

ISLAMABAD: The International Monetary Fund (IMF) and Pakistani authorities are continuing talks for finalising reprioritizing expenditures on floods, including BISP spending and rehabilitation needs besides accelerating reforms to preserve fiscal stability.

“The IMF staff continued discussions with Pakistani authorities over policies to reprioritize and better target support towards humanitarian and rehabilitation needs, while also accelerating reform efforts to preserve macroeconomic and fiscal sustainability,” IMF Resident Chief in Pakistan Esther Ruiz Pervez stated in a reply when The News asked her about the ongoing talks on Wednesday. “The timely finalization of the recovery plan is essential to support the discussions, along with continuing financial support from multilateral and bilateral partners,” she added.

A top official of the Finance Ministry said the IMF country chief’s statement clearly indicated that Pakistan and the IMF were moving towards holding talks for finalising macroeconomic and fiscal framework. The Pakistani authorities have shared revised macroeconomic and fiscal framework with the IMF side whereby the flood-related spending in the shape of BISP disbursement of Rs103 billion and rehabilitation cost would be incorporated in the range of Rs150 billion.

The real GDP growth target has been revised downwards to 2 per cent while the CPI-based inflation would hover around 23 to 25 per cent. The nominal growth has been envisaged at 25 per cent. The revised fiscal framework hiked the budget deficit target from 4.9 per cent of the GDP to the tune of Rs900 billion mainly in the shape of increased debt servicing requirements. There is another shortfall on account of non-tax revenues in the shape of Petroleum Development Levy, which was envisaged at Rs855 billion, but now the government might fetch only Rs500 billion. So there would be a shortfall of Rs350 billion. The government has projected to compensate Rs71 billion through hiked SBP profit as its projection was increased from Rs300 billion to Rs371 billion for the current fiscal year. The FBR target was kept unchanged at Rs7.47 trillion for the current fiscal year. The PSDP would be revised downwards and space would be created to divert resources towards the reconstruction of flood-affected areas.

“We have sought an adjuster for flood-related spending for allowing increased budget deficit, but the primary surplus envisaged in the budget will be achieved,” said the official, adding that the real problem would arise on the external front of the economy as the revised macroeconomic framework would work out fresh numbers of current account deficit, thus the figures of exports, imports, remittances and foreign direct investment would also be readjusted. Overall, the current account deficit in the first four months (July-Oct) decreased and stood at $2.82 billion against $5.3 billion in the same period of the last fiscal year, registering a decline of 47 per cent. The IMF has projected the CAD around $9.2 billion for the current fiscal year.