Back to begging from the IMF

Discussion in 'China' started by Galaxy, Oct 23, 2011.

  1. Galaxy

    Galaxy Elite Member Elite Member

    Aug 27, 2011
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    Back to begging from the IMF

    Sunday, October 23, 2011

    ISLAMABAD: Pakistan and IMF team shall be sitting together from November 9th, both to ascertain the size of the next possible IMF bailout package within the ongoing fiscal year, and to finalize doable prior actions to ensure Pakistan’s re-entry under close IMF watch, The News has learnt.

    Both sides will sit down to determine the gap on external account being faced by the country over the medium term and hammer out an agreement on a prior-actions menu under the head of ‘conditionalities’ which includes, finalizing timeframe for approving Reformed General Sales Tax (RGST) from the Parliament; doing away with cash bleeding power sector subsidies; lay-offs in State Owned Enterprises (SOEs) such as Railways, PIA, Pakistan Steel Mills, power distribution companies (Discos) to improve their financial health. “Certain prior actions that will be doable with immediate effect shall also be finalised,” a top official of the government’s economic team told The News, adding, the Fund might ask State Bank of Pakistan to raise its discount rate by 200 basic points with immediate effect.

    Pakistan is likely to enter into next IMF programme within the ongoing fiscal year, said the official, adding that the size of the Fund programme was not so much important but what was of greater significance was that coming under the IMF umbrella meant that all other multilateral and bilateral would have trust and confidence at a time when the country was being run by a political regime tainted by massive corruption and incompetence.

    Pakistan’s financing gap on external account will be determined on the basis of total inflows and outflows and repayments to the IMF’s previous loan starting from February 2012, oil prices in international market and growth in exports and remittances would play a major role.

    “Both sides will hold talks from November 9, 2011 and as yet there is no cut off date for these talks. We expect to continue dialogue with Fund authorities for about one week under Article IV consultation, which is mandatory for all Fund members once a year,” sources confirmed while talking to The News here on Saturday.

    When contacted, Secretary Finance Dr Waqar Masood confirmed on Saturday that the IMF mission would hold talks with Pakistani authorities from November 9 to determine exact health of the national economy and give its assessment to move forward in the desired direction.

    The IMF team will make its assessment for the financing gap on external account for next three to five years on the basis of which the size of next bailout package will be finalized. Alone in this ongoing fiscal year, Pakistan will have to repay the Fund loan amounting to $1.2 billion starting from February 2012. “Our foreign currency reserves in the range of over $17 billion are in a comfortable position but it will come under pressure when the Fund repayments will start,” said the official.

    It was assessment of Pakistan’s economic managers that the foreign currency reserves would deplete in the range of $1.5 to $2 billion in the fiscal year keeping in view exports growth and growing remittances but in the last three months the foreign reserves dipped by $1.4 billion, is causing serious concern amongst the government’s economic managers.

    The fiscal side of Pakistan’s economy is the major cause of economic ills and the IMF will put a condition by giving few months period to get approval of RGST from the Parliament. The autonomy of the SBP will also be another condition of the IMF programme. Pakistan’s top economic managers were conceding in private discussions that if oil prices witnessed upward trends in international market and government failed to undertake institutional reforms to overcome difficulties of public finances then the country would have to approach the IMF for another bailout package earlier than expected.

    Back to begging from the IMF

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