The International Monetary Fund said on Friday it was broadly satisfied with Pakistan’s economic progress after stepping in to save the country from a possible default earlier this year, reports Reuters. The IMF has agreed to loan Pakistan $6.7 billion over three years as part of the programme, but its condition of quarterly reviews means the cash is not guaranteed.A team led by the IMF’s regional adviser, Jeffrey Franks, visited Islamabad this month to assess if Pakistan was working hard enough to meet conditions intended to promote reforms.
‘Under the IMF programme the government is making strong efforts to increase tax collections over time to bring down the deficit,’ he told reporters in Islamabad after completing his mission.
‘That will leave them in a much better position two or three years down the road to absorb any decline in other sources of funds.’
Pakistan has already once averted a balance of payments crisis in 2008 after securing an $11-billion IMF loan package, which was suspended two years ago after economic and reform targets were missed.
This time around, prime minister Nawaz Sharif, who was elected in May, promised the IMF to privatise loss-making state industries, reform a faltering energy sector, expand Pakistan’s tiny tax base and cut government borrowing.
But the financial situation remains dire. Pakistan’s foreign exchange reserves have dwindled to about $4 billion, or the equivalent of four week’s worth of imports, and several large repayments fall due in the next six months.
Tax collection is a huge hurdle in a country where just 0.57 per cent of Pakistani citizens paid income tax last year, contributing to one of the lowest tax-to-GDP ratios in the world. Public services are woefully underfunded.
Sharif also plans to privatise 32 state-run companies, including two huge gas companies, the state oil company, several banks, the national airline and power distribution companies.
-With New Age input
