An International Monetary Fund team is expected to visit in March, for the first review of the current 37-month Extended Fund Facility. This package of $7 billion is due for its first review by the end of the quarter, after which the second tranche worth $1 billion will be disbursed. With $30.35 billion to be paid next year, not only will the cash be useful, but a successful review will mean IMF approval of the current reform programme, and thus make it feasible to go to the money markets for the money that would enable the country to make the payments.
The biggest problem was illustrated by the January revenue collection figures, which added Rs 84 billion to the shortfall, which has reached Rs 468 billion for the first seven months of the year. The January shortfall came even though January collection was up substantially over theyear before. The implication is that the target may have been set too high by the IMF, and there will be a strong push by the government for revision of the target. At the same time, one reason for the reduction is the decrease in inflation, and it is anticipated that the resulting economic growth will mean increased revenue. However, that is not the only trouble foreseen, as the imposition of an agricultural income tax is missing deadlines, as is the taxing of retailers. Pakistan will have to show that it is making progress on these issues, and can at best hope for an extension in the deadline rather than a complete waiver. It is also encouraging that the tax-to-GDP was increased, going from 9.5 percent in the first quarter to 10.8 percent, though still short of the 13. percent promised by the government for the end of the programme.
The main problem the government will have to tackle is whether it is likely to achieve the goal of avoiding an IMF programme at the end of the current one. That will depend on whether it is able to implement this programme successfully, not so as to get another programme, but so as to avoid another programme. Clearly, Pakistan wants to avoid the fate of Argentina, which has been in IMF programmes since 2008, the latest of which was for $44 billion last year. Pakistan must learn to export more, that is the only way for it to be abled to pay its debts.
