Govt faces IMF ‘severe review’ due to fiscal deficit

ISLAMABAD: The country’s fiscal deficit in the first half of 2019-20 exceeded 2.3 percent of GDP despite strict control on government spending, the International Monetary Fund (IMF) delegation told Pakistani authorities. faces a ‘very tough’ second-quarter review.

The July-December 2019 fiscal deficit stood at Rs 2.3,995 billion of GDP, 0.6 percent higher than the first quarter, largely due to a revenue shortfall of Rs 2,90 billion in the same period.

The federal government has limited the expenditure from July to December to 1 trillion 83 billion rupees, which is 42 percent of the 4 trillion 40 billion rupees allocated in the budget.

Senior officials told the IMF that ‘no supplementary grants have been released in the first six months on public expenditure and the government is sticking to its austerity pledge’.

During the same period, the fiscal deficit in 2018-19 was 2.7 percent of GDP or 1 trillion 3 billion rupees, but the annual deficit was 8.9 percent against the budgeted 4.9 percent.

He said that ‘IMF had estimated a deficit of 3.2% in the first half of the financial year, but the deficit has almost reached there and the gap is only 34 billion rupees’.

He said that the government had performed well on the basic balance criteria under the IMF program, but this could not impress the delegation. Most of this came through rollovers from the previous financial year and has not contributed to revenue growth.

The officials involved in the negotiations with the IMF delegation said that the tax shortfall will be more than 7 trillion 50 billion rupees.

According to him, ‘Further fiscal adjustment and additional revenue measures were briefed in the initial talks, but this was done deliberately as the policy level discussion would take place from February 11 (Tuesday) and additional measures given the weak economic conditions. The chances of tax measures are fifty-fifty’.

Responding to a question, the officials said that there is a 10 to 20 percent chance of a deeper revision in the revenue targets as the IMF has already allowed a reduction in the tax targets from Rs 55 trillion to Rs 52 trillion 70 billion. has given

Officials said that the non-tax revenue could be increased to Rs 16 trillion from Rs 8 trillion 95 billion allocated in the budget, which was already revised to Rs 12 trillion due to recovery of telecom revenue, State Bank profit. What was done was Rs.

Officials suggested that concessions in petroleum and gas infrastructure cess rates, privatization process and revision of central bank profitability and profitability of public sector enterprises due to oil prices would further help in this regard.

According to him, not only the revenue but also the performance in the power sector has not been as per schedule, the authorities have not been able to control the revolving debt as promised while the second quarter adjustment of electricity tariff for capacity payments of power producers. They have also been behind in announcing.

The IMF delegation’s review will be completed on February 13, during which it will be determined whether or not the government will receive $450 million in March under the 39-month program, which the government has in foreign exchange reserves. And there is a dire need to restore confidence in the market.

Pakistan will have received $1.44 billion so far in the form of $991 million in July and $152 million in December.

Out of the IMF’s $6 billion program, the country has received $1.65 billion until 2023, of which it will return $4.36 billion to the IMF during the same period.