ISLAMABAD– International Monetary Fund (IMF) Mission Chief Ernesto Ramirez Rigo on Tuesday said programme implementations by Pakistan have been on track for the first review under the Extended Fund Facility (EFF).
In a statement Rigo said, “All the performance criteria for the targets of the first quarter were met or exceeded, in particular those on the external sector, foreign currency reserves and NDA, likewise on the fiscal side.”
“The economic outlook remains unchanged relative to what we had at the time of the program approval within the deceleration of economic activity as was expected at the time of program approval, with only two revisions; one revision for inflation, which we have slightly lower in part because some of the pass through from the exchange rate adjustments has been more moderate than we anticipated,” he added.
“And at the same time, we have also made some adjustment to the export-import composition of the current account, but without any major substantial changes in the total current account deficit share of GDP that we expect to see this year,” he further said.
Speaking about the implementations from the Pakistani side, Rigo said that the country remained strongly committed to all the objectives of the program.
Highlighting the areas where Pakistan still needed to work and continue to make progress, Rigo said the quality of the fiscal adjustment was at the top of the list.
“While we have already started to see improvements on the fiscal accounts, it is very important that this improvement is based on better underpinning for it to be permanent,” he said. “That will require continued work on the tax revenue side, rather than just on total revenue increases, or containing expenditure.”
“Pakistan is still lacking in the area of development spending, such as infrastructure, and we feel that it is very important that fiscal space is created to meet this development needs,” he said, adding that the quality of fiscal adjustment will start to have a larger and larger focus in the program.
“That will of course include tax policy reforms, something that will be of relevance for the following year budget. And then one other structural area which supplement the fiscal adjustment, is tackling the issue of circular debt in the energy sector. The authorities have put together a comprehensive strategy to address the flow and now this strategy has started to be implemented, that will be the purpose for our forthcoming reviews.”
Furthermore, he emphasised that there was a need for NEPRA legislation. “That’s something that is a benchmark for the end of December, and we look forward to look at those reforms.”
The IMF official was also asked to comment on the concerning issues regarding the propgramme. He expressed satisfaction on the external position and the smooth transition to market-determined exchange rate.
“On the fiscal side”, he said there is a need to “employ more of our time in the months to come. It’s an area where it’s not just about the improvement on the total — on the headline number on the fiscal headline number, it is about the quality.”
“But we want to be very mindful to minimize the impact of the adjustments on economic growth, this is why we also put the emphasis on tax revenue rather than expenditure, which normally comes with larger multipliers.
“We calibrated that very carefully, but we want to see more tax revenue mobilisation, and that’s an area which is not easy, it’s very tough, there are many political economic issues around that. And that’s where we think it’s an area of concern that we should continue to make progress there.”— PRESS RELEASE
