ISLAMABAD: The International Monetary Fund (IMF) and Pakistan on Wednesday revised downward all macroeconomic targets including GDP growth rate to 2.5 per cent from earlier envisaged target of 3.5 per cent for the ongoing fiscal year to approve the second tranche of $800 million for Islamabad under Standby Arrangement (SBA) programme.
Both sides also agreed to revise downward inflation target to 20 per cent from earlier set target of 23 per cent, FBR tax collection to Rs1,300 billion from earlier envisaged target of Rs1,360 billion for 2008-09.
Secretary Finance Dr Waqar Masood, while talking to The News from Dubai on Wednesday night, confirmed that the IMF executive Board would approve its second tranche for Pakistan by end March 2009 after both sides agreed on all major issues.
The successful completion of first review of the IMF for gauging the economy of Pakistan till Dec 31, 2008 and envisaging targets for the next two quarters will pave the way for convincing the Bretton Wood Institution to provide an additional $4.5 billion to Pakistan in its bid to further build up its foreign currency reserves that have already gone up to $10.2 billion.
However, the sources told this scribe that the Fund authorities linked decrease in discount rates with reduction in core inflation, which means that the central bank is unlikely to scale down discount rates in near future.
During the policy level talks held at Dubai on Wednesday, Pakistani side was led by Advisor to Prime Minister on Finance Shaukat Tarin while the IMF delegation was led by Masood Ahmed, head of its Middle Eastern Department of the IMF.
The GDP growth target was scaled down from 3.5 per cent to 2.5 per cent for the ongoing fiscal year 2008-09. The GDP growth target was envisaged at 4 per cent for the next budget 2009-2010.
The IMF prescriptions described as, one shoe fit for all, approach will result into lower GDP growth for the ailing economy of Pakistan in the context of tight fiscal and monetary policies for the next fiscal year as well, said an independent economist while talking to this scribe here on Wednesday.
The inflation, the official said, would be aimed at bringing down from 23 per cent to 20 per cent by June 2009. For the next fiscal year 2009-2010, the inflation target was envisaged at 6 per cent.
Both the IMF and Pakistan also evolved consensus for revising downward the FBR tax collection target from Rs1,360 billion to Rs1,300 billion for the ongoing fiscal year. Pakistani side explained to the IMF that the FBR was facing revenue shortfall by Rs20 billion alone in January 2009 and the same trend persisted in Feb 2009, leaving no other option to scale down the annual tax collection target.
The IMF agreed to reduce the tax collection target by Rs60 billion keeping in view shortfall being faced by the FBR, said the official sources.
The adjustment in nominal GDP growth by scaling down the real GDP as well as inflation paved the way for reduction in overall FBR tax target from Rs1,360 billion to Rs1,300 billion, which will be equivalent to 10 per cent of the GDP.
The IMF and Pakistan also agreed to set 10.6 per cent of the GDP for tax collection target of the FBR for the next budget 2009-2010, said the official.
The IMF had approved $7.6 billion loan under 23 month SBA program on November 2008 and provided front loaded $3.1 billion to Islamabad. The second tranche of $800 million by end March will help Islamabad to build up reserves position in months ahead.
Courtesy: The News
Both sides also agreed to revise downward inflation target to 20 per cent from earlier set target of 23 per cent, FBR tax collection to Rs1,300 billion from earlier envisaged target of Rs1,360 billion for 2008-09.
Secretary Finance Dr Waqar Masood, while talking to The News from Dubai on Wednesday night, confirmed that the IMF executive Board would approve its second tranche for Pakistan by end March 2009 after both sides agreed on all major issues.
The successful completion of first review of the IMF for gauging the economy of Pakistan till Dec 31, 2008 and envisaging targets for the next two quarters will pave the way for convincing the Bretton Wood Institution to provide an additional $4.5 billion to Pakistan in its bid to further build up its foreign currency reserves that have already gone up to $10.2 billion.
However, the sources told this scribe that the Fund authorities linked decrease in discount rates with reduction in core inflation, which means that the central bank is unlikely to scale down discount rates in near future.
During the policy level talks held at Dubai on Wednesday, Pakistani side was led by Advisor to Prime Minister on Finance Shaukat Tarin while the IMF delegation was led by Masood Ahmed, head of its Middle Eastern Department of the IMF.
The GDP growth target was scaled down from 3.5 per cent to 2.5 per cent for the ongoing fiscal year 2008-09. The GDP growth target was envisaged at 4 per cent for the next budget 2009-2010.
The IMF prescriptions described as, one shoe fit for all, approach will result into lower GDP growth for the ailing economy of Pakistan in the context of tight fiscal and monetary policies for the next fiscal year as well, said an independent economist while talking to this scribe here on Wednesday.
The inflation, the official said, would be aimed at bringing down from 23 per cent to 20 per cent by June 2009. For the next fiscal year 2009-2010, the inflation target was envisaged at 6 per cent.
Both the IMF and Pakistan also evolved consensus for revising downward the FBR tax collection target from Rs1,360 billion to Rs1,300 billion for the ongoing fiscal year. Pakistani side explained to the IMF that the FBR was facing revenue shortfall by Rs20 billion alone in January 2009 and the same trend persisted in Feb 2009, leaving no other option to scale down the annual tax collection target.
The IMF agreed to reduce the tax collection target by Rs60 billion keeping in view shortfall being faced by the FBR, said the official sources.
The adjustment in nominal GDP growth by scaling down the real GDP as well as inflation paved the way for reduction in overall FBR tax target from Rs1,360 billion to Rs1,300 billion, which will be equivalent to 10 per cent of the GDP.
The IMF and Pakistan also agreed to set 10.6 per cent of the GDP for tax collection target of the FBR for the next budget 2009-2010, said the official.
The IMF had approved $7.6 billion loan under 23 month SBA program on November 2008 and provided front loaded $3.1 billion to Islamabad. The second tranche of $800 million by end March will help Islamabad to build up reserves position in months ahead.
Courtesy: The News
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