Shaukat Tareen Says IMF Will Be Approached In Next 10-15 Days

Wednesday, November 12, 2008 at 10:14 am

Shaukat Tareen Says IMF Will Be Approached In Next 10 15 Days ISLAMABAD: Advisor to Prime Minister on Finance Shaukat Tareen Tuesday informed the Senate that government would be approaching the International Monetary Fund (IMF) within the next 10 to 15 days for endorsement of our program as suggested by International Financial Institutions (IFIs).

“IFIs agreed and appreciated our economic program and social safety net, but desire to get it approved from IMF before providing us the financial facility,” he told the House in a brief statement on the onset of debate on economic situation in the country.

“The IFIs have seen our targets as achievable but ambitious that need a lot of discipline and lot of determination,” he said.

The Advisor said, Pakistan is facing enormous economic challenges having various reasons like global shocks, shortage of oil and food, inaction of the past government and economic managers.

“This ultimately reflected in massive loss of foreign exchange reserves that went down to less than $ seven billion from earlier US$ 16.4 billion in October 2007,” he said.

Tareen said, inflation is 25%, excessive expansion in money assets is 25 to 21%, fiscal deficit which was 7.4% last year, currency has depreciated by over 30% and has slowed down the growth rate of the country that we believe is going to be less than five percent.

He said the stock market has declined by over 40% from 15500 points to little over 9000 points.

Tareen said in this situation the country not only needs economic revival but also restore the confidence of rating agencies and IFIs to ensure inflow of foreign currency to strengthen our reserves. “Loss of reserves is a mirror image of stagnation in the foreign currency inflows. As inflows are not there that is why the reserves are going down. We are facing the ever growing balance of payment deficit.”

He said the 2008-09 budget was a sound and tough budget and I am giving them a road map to curtail the fiscal deficit.

“We believe if at all we do not go to IMF for funding, we need its endorsement of our plans,” he added.

Tareen said, when IMF looked at our plans they saw what we have proposed, has already been reflected in our budget. “They said these are achievable targets but need lot of discipline and determination.

He said the focus of our discussion with IMF was on few areas. “We said we shall bring down our fiscal deficit from 7.4 to 4.3%, although it is a tough target due to inflation, yet it is achievable.

He said the second point we discussed was zero borrowing from State Bank. “We still believe that excessive borrowing by the previous government added fuel to the fire. We believe there should be no net borrowing from State Bank.”

He said due to our policy the fiscal deficit which was estimated at Rs 175 billion during the first year has come down to Rs 138 billion. He said from the outstanding debts Rs 160 billion have come back to our table and the government has done no additional borrowing.

He said we have also budgeted Rs 50 billion from foreign loans and Rs 60 billion of fund raising from national savings and we are short of just Rs 20 to 25 billion.

He said the government is committed to its word of zero borrowing from Central Bank. We had actually exceeded the discount rate of 20%.

For monetary growth, he said, it was 20% last year but has come down to 14% this year and for this we must have to have realistic exchange rate.

He said the exchange rate was artificially kept at Rs 60 per dollar during previous years by borrowing from international markets which affected our exports and the imports thrived creating imbalance in payments.

He said the exchange rate has come down from Rs 84 to Rs 79 and further to stabilize the exchange rate we shall have to bring down the inflation into single digit.

Tareen said the government will also have to expand the tax to GDP ratio from existing 10.5 to 15% during days ahead.

He said the IFIs and the IMF have appreciated our social security net for poor and vulnerable and the programs like Benazir Income Support Program. “But, we require their help not for the fiscal side but for balance of payment. We also need to boost our exports. Only these kind of points have been discussed with the IMF.”

He said the core inflation at present is at 18.3% and we got to move on as Pakistan is in difficult economic situation. “If we believe we are not healthy and we have to get medicines, may be it is a bitter pills. But, we have to move on to address the fundamental issues which we are facing us then we can move to the agenda of progress.”

“There are no harsh conditionalities, they are accepting what we have proposed to them, so there is no harm in contacting the IMF,” he added.