Pakistan successfully completes article-IV consultations with IMF in Dubai
DUBAI: Pakistan and the International Monetary Fund (IMF) successfully completed Article IV consultations in Dubai on Wednesday.
While briefing media along with IMF Mission Chief Harald Finger, Finance Minister Ishaq Dar cited consultations broadly covered multiple areas of the economy.
Dar added successful completion of the discussions indicates the government’s commitment in further deepening of structural reforms in the areas of energy, monetary, financial and public sector enterprises.
The minister said the gross domestic product (GDP) continued to maintain its growth momentum above 4 percent for the third successive year.
The government in the current fiscal year, he said, was expecting a growth above 5 percent, which would be the highest in the last nine years.
“The overall economic environment is conducive, backed by an accommodative monetary policy, as policy rate at 5.75 percent is the lowest in last few decades,” Ishaq Dar said.
He said that inflation in March 2017 slightly increased to 4.9 percent as compared to 3.9 percent year-on-year (YoY) basis, while during July-March FY 2016-17 it stood at 4.01 percent as compared to last year’s 2.64 percent, reflecting higher domestic demand and increase in global commodity prices.
He said that credit expansion to private sector had increased to Rs 393 billion during July-March 2016-17.
The minister said there had been a surge in import of machinery and raw materials, pointing to robust industrial activities and build-up of future productive capacity of the economy.
“The LSM (large scale manufacturing) continues to grow at 3.5 percent with an increase in production of cement, steel, pharmaceuticals, automobiles, paper & board and electronics,” he added.
An increase in production of commodities would have a spill-over effect on the services sector, Dar said.
Dar said the budget deficit, which stood at 8.2 percent of the GDP in FY 2013, had been brought down to 4.6 percent in FY 2016. “During the current financial year (FY), it has been projected to reduce to 4.1 percent of the GDP.”
“We are also committed to reducing net public debt, which was 60.2% at close of FY 2016, in order to lay the foundations for sustained growth,” he said, adding that in March 2017, the Federal Board of Revenue (FBR) recorded a growth of 16.1% in revenue collection.
Thus, total collection by the FBR in the first nine months of the current financial year stood at Rs 2,258 billion, which was unprecedented in its history, he added.
The minister said the shortfall in FBR’s revenue collection in the first eight months was due to pro-growth incentives offered to various sectors of the economy, particularly the exports and agriculture. The major reason for revenue gap amounting to Rs 100 billion was because of not passing on the full impact of the petroleum, oil and lubricants (POL) prices to the common man, he added.
He said that Pakistan had undertaken two important initiatives. “First, on March 21, 2017, it signed the revised Avoidance of Double Taxation Agreement with Switzerland. Second, on September 14, 2016, it signed the Organisation for Economic Co-operation and Development’s (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters.” The initiatives would help reduce and prevent tax evasion in the future, finance minister said.
Development expenditure: The minister said that despite a reduction in the fiscal deficit over the last three years, allocation for Public Sector Development Programme (PSDP) had been more than doubled and during FY 2017. He said that the budget deficit (borrowing) would only be for its development spending, which was a milestone achievement.
He said the current account deficit had increased to $5.5 billion in Jul-Feb FY 2016-17. This was largely due to a sizable increase in imports of capital goods, along with delayed receipts of Coalition Support Fund (CSF), he said.
Dar said the rise in overall import payments was mainly driven by increased purchases and higher prices of fuel. However, there was a significant increase in capital goods’ imports, which, he added, would lead the economy to a higher growth path.
He said that foreign exchange reserves at present were hovering around $22 billion, which were expected to reach over $23 billion by the end of June 2017. “The government is committed to supporting the poor and the most vulnerable segments of the population through the BISP. Social safety net expenditures have increased by over 300 percent through the four budgets of the current government,” he added.
He said that significant expansion in allocation to BISP had taken place, which was enhanced from Rs 40 billion in FY 2013 to Rs 115 billion in FY 2017, leading to an increase in coverage from 3.7 million to 5.45 million families.
Annual stipend, he said, had also been enhanced from Rs 12,000 to Rs 19,336 during the period, while an amount of more than Rs 299 billion was disbursed among the poorest families as unconditional cash transfers.
“We continue to diversify financing from both domestic and external sources, lengthen the maturity profile of domestic debt and improve the balance between domestic and external debt,” he said.