Pakistan’s investment and growth would continue to be hampered by delays in implementing key policy reforms, terrorist threats, street violence and urban criminal activity as the upcoming withdrawal of coalition forces from
“Delays in the implementation of the reform agenda would impede investment and weaken growth prospects. Investment and growth continue to be hampered by terrorist threats, street violence, and urban criminal activity. The upcoming withdrawal of coalition forces from neighboring
The IMF’s Staff Report was presented in the Executive Board’s consideration on
The Fund once again reiterated that Pakistan’s economy grew by 3.3 percent against the government’s claim of 4.1 percent for the previous financial year 2013-14. Similarly, the country’s economy would grow by 4 percent against the government rate of 5 percent during ongoing fiscal year 2014-15. “SBP reserves have improved, boosted by bilateral inflows, including grants, Eurobond issue by the government, and official disbursements from development partners.
These inflows contributed to an appreciation of the rupee by almost 7 percent against the dollar during the third fiscal quarter despite accelerated spot market purchases by the SBP. Despite these developments, the reserve position remains insufficient, covering less than two months of imports”, maintained the Report.
The Report also stated average inflation is expected to reach about 8.8 percent in FY2013/14 before easing to around 8.1 percent next year, as inflation expectations will be anchored by prudent monetary policy and sustainable fiscal policy. The government has set budget deficit at 4.8 percent of the GDP.
The consolidation is underpinned by tax policies that aim mainly to increase the tax base, including the initial steps to eliminate concessions granted through SROs and a further hike in the Gas Infrastructure Development Cess (GIDC) of around 0.2 percent of GDP. While tax revenue measures, at about 0.8 percent of GDP, remain in line with the effort envisaged under the programme, the lower revenue base (due to the underperformance in FY2013/14) will produce a lower tax-to-GDP ratio than envisaged in the programme.
Nonetheless, the remainder of 3G licence receipts and a new 4G auction will compensate for this shortfall. The authorities are committed to additional permanent tax measures in FY2015/16 to further raise the tax-to-GDP ratio. On the expenditure side, the budget envisages that current spending will remain contained-including by further reducing electricity subsidies-in order to provide space for a stronger increase in capital spending and for a further significant increase in targeted support for the poorest under the Benazir Income Support Program (BISP).
According to the Report, the government has planned to submit amendments to Anti-Money Laundering Act (AMLA) to Parliament by
The lower tax revenues entail lower transfers to the provinces, which will have to reduce provincial current and capital spending to comply with agreed targets and generate additional savings. Provincial under spending which has been the norm in recent years-could fully cover the remaining fiscal shortfall to meet the year-end deficit target while providing room to avoid further reductions in the federal capital spending.
According to the Report, the authorities continue with their plans to bring electricity tariffs to cost recovery levels.
Nepra’s notification implied an increase in electricity tariffs by on average 4 percent, while eliminating subsidies on industrial, commercial, bulk, and residential consumers above 200kWh of monthly consumption. This tariff adjustment is expected to reduce the electricity subsidies to 0.5 percent of GDP in FY2014/15 from around 1 percent in the previous year.
The IMF also proposed four new structural benchmark including steps to improve the SBP’s internal operations, Filling the vacancies in the Nepra Board (
Meanwhile, two structural benchmarks are to be modified: The benchmark on SRO reduction will be clarified to include in the FY2014/15 budget the elimination of tax exemptions and concessions granted through SROs for an amount consistent with the fiscal deficit reduction objective. The date for the submission of deposit insurance legislation will be modified to allow more time for technical assistance on the draft.
Most Popular Stories
- Criminal Investigation Opened Into James Foley's Death
- Apple Stock Bounces Back Big Time
- Investors Betting on ECB Stimulus Measures
- 'Mythbusters' Build Team Gets the Boot
- Jennifer Lopez Would Marry Again
- Hackers Get Homeland Security Employee Records
- Mo'Ne Davis a Big Winner Despite Loss
- Florida Judge Rules in Favor of GOP Voter Map
- Advocacy Group Calls for Chrysler Probe
- DHS Warns Retailers About Malware in Cash Registers