The Country Representative of International Monetary Fund (IMF) in Pakistan Ms Teresa Daban Sanchez has said that the Extended Fund Facility (EFF) to Pakistan is all set to achieve some major goals including revenue base fiscal sustainability.
It is being achieved through the strategy by removing exemptions and privileges, enhancing social and productive spending, coordination with provinces, and elimination of quasi-fiscal circular debt and SOE losses.
She said this during a keynote session with Dr Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI) on Wednesday, said a press release.
Ms Sanchez added further on the occasion that the goals that are very important for the future direction of the country, also include a market determined and flexible exchange rate as well as the independent central bank with primary focus on price stability. Moreover, strengthening the social safety net to protect the most vulnerable is a key requirement in addition to strengthening institutions and bringing reforms, especially in the areas of PFM, central bank’s autonomy, tax policy and administration, energy sector, SOEs administration and FATF etc.
While shedding light on the impact of Covid-19, she remarked that the economy was on the track with 2.4% growth rate till March 2020. However, after May 2020, it witnessed decline by 1.5 as resources were diverted towards Covid-19 mitigation and containment. She added further that Pakistan received $ 1.4 billion funds from IMF (Rapid Financial Instrument) in April 2020 and also from World Band and Asia Band on the basis of multi-lateral area to mitigate this challenge.
“In the current situation and amid the third wave of the pandemic, the growth projected at 1.5 % of the GDP and inflation will remain volatile,” Ms Sanchez said and added that the monetary policy is accommodative and fiscal policy is prudent but the public debt guarantees increased to 92.8% GDP.
She emphasized that a recalibration of policies and reforms and increasing the revenue collection, ambitious tax policy reforms and broad base fiscal structural reforms are the need of hour. In the energy and gas sector, a recalibration of the Circular Debt management Plan (CDMP) which includes short-and-medium term measures like Increasing revenue by aligning power tariff with cost recovery levels, reducing generations costs, streamlining fiscal impact, would be an important step. It could be achieved by targeted subsidy and governance issues like NEPRA act amendment, reducing TD losses and theft that are the major pillars for the program.
“Although the Covid-19 shock temporarily suspended the progress of EFP, the authorities remained committed to the ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth and achieve the EFP medium-term objectives,” she added.
In response to several questions by the audience, Ms Sanchez said that the duration and size of the EFF program will be the same, even after the third wave. It will focus on the collaboration and to improve the economy of the institution in the country.
She added further that these programs are aimed at the institution and enhance the performance of the regulatory institution like NEPRA, so that to keep a fiscal discipline. She was of the view that policies need to be adjusted with reality and if there is any need in the third wave shock then the program will be adjusted accordingly, as the package is not a straightjacket.
About the autonomy of regulators and a perception that is being compromised under the IMF program, she reiterated that all the reforms that have been recommended were long due and are necessary for the help of the poor and vulnerable. She explained that the IMF cannot dictate the country’s legislation and the institution but just play an advisory role upon a request.
She was of the view that a change or transition in the ministers or authorities does not affect our role and commitment with the people of Pakistan. On tax reforms, she said that the tax policy reform needs to be very comprehensive and deep and the corporate income tax and personal income tax both need to be made sure in the country. While commenting on circular debt, Ms Teresa said that the debt sustainability is the main role of the IMF in any country and with right policies and with improved management countries can better manage their debt profile. Pakistan is doing well in this area of the program. The SOEs management is the major component for the betterment of the country.
Ms Sanchez, while commenting on FATF compliance, she said that the progress so far and plan for the future is encouraging regarding the FATF. However, the plan execution will need more rigorous measures.
