Dar is unable to set a firm timetable for the IMF deal.
The World Bank strongly recommends that Pakistan eliminate its 340 billion rupees annual subsidy to the wealthy.
ISLAMABAD: The World Bank asked Pakistan on Thursday to stop giving the wealthy 340 billion rupees in yearly subsidies since the finance minister, Ishaq Dar, had not been able to provide a firm date for the staff level agreement with the IMF.
Nonetheless, Dar’s ministry expects Pakistan to continue participating in the Fund’s programme for a short- to medium-term time frame. The finance secretary claimed there was no short-term answer “other than to implement the IMF programme” at a seminar jointly organised by the World Bank and Ministry of Finance, which was hosted in a five-star hotel.
Speaking at a seminar on restoring economic stability through improved public financial management, Dar said, “We seem to be quite close to signing the staff-level agreement” (PFM).
Interestingly, the officials from the finance ministry who were in charge of the bad budgeting were seated on the stage, including those who had made it a habit over the last three years to reprint budget books after making mistakes in the initial batch of books that were published.
Dar spoke very briefly about the staff level agreement and was unable to provide a precise deadline. In his broadcast remarks, Dar stated that the ninth review process had gone longer than it ought to have. Dar denied having suggested that the agreement could be disclosed today (Friday) in response to the query.
He did, however, assert that Pakistan was “fully committed” to seeing the Extended Financial Facility Programme through to its conclusion with the IMF.
On February 10, the finance minister claimed that Pakistan and the IMF will achieve a staff level agreement within a few days, but that claim is now starting to lose credibility. A day earlier, Jameel Ahmad, the governor of the State Bank of Pakistan, stated that Pakistan was close to finalising the IMF agreement, although he did not provide a specific timeframe.
Dar reaffirmed that Pakistan would uphold all of the declarations of independence made by the previous administration. The media was told to leave the area once Dar had left the location.
The major credit rating agencies have downgraded Pakistan due to its acute economic crisis and concern over a significant chance of default.
The IMF programme must be implemented in the immediate term, according to Hamed Yaqoob Sheikh, the secretary of finance. The secretary of finance stated that Pakistan will participate in the IMF programme “from short to medium term” in his presentation.
The present IMF programme is set to expire in June, and the Ministry of Finance may be considering requesting a new IMF programme given the use of the terms “short- to medium-term” in reference to the existing programme.
In the secretary’s presentation, the phrase “economic plan” was displayed at various time intervals.
According to the Secretary of Finance, the current account deficit is unmanageable, the tax to GDP ratio is low, and the economy’s willingness to save money is fast falling. He added that the debt was growing quickly and the pension expense was out of control.
The secretary added that something else needed to be considered because the privatisation initiative had not been successful.
Tobias Haque, the World Bank’s head economist, stated that Pakistan needs to reform its budget in order to resolve the current problem and achieve sustainable economic growth. According to the main economist, the government can reduce spending that doesn’t do much to promote growth and development, including the Rs340 billion in annual subsidies that mostly help the wealthy.
The government’s spending hasn’t done anything to promote Pakistan’s long-term growth and development.
“How can an economy thrive when fixed expenses like pension, subsidies, and interest costs account for 70% of recurring spending?” enquired Tobias.
According to Tobias, the government may increase revenue by taxing assets and real estate more heavily and eliminating the exemptions that account for about 30% of the GST on an annual basis. He claimed that by cutting back on subsidies and losses, the government could potentially save a trillion rupees.
Tobias proposed that the government can make sure that the Public Financial Management Act is properly implemented, which will strengthen the connections between planning and budgeting, enhance cash management procedures, and enable the establishment of the Treasury Single Account. He continued that these technical changes might save Rs160 billion every year.
Dar acknowledged that the economic crisis was more severe than he had anticipated. To be completely honest, I had no idea how deep the mud was from a distance.
In comparison to 1998 and 2013, the Minister claimed that the quagmire was deeper and far more intricate this time.
The finance minister stated that Pakistan was now experiencing difficulties and that everyone needed to work together to find solutions.
The finance minister gave the PM’s House permission to spend an additional Rs18.4 million last week for employee-related costs.
Dar reaffirmed Pakistan’s commitment to avoid default. He said that the country was being harmed by the ongoing misleading propaganda that the nation was breaking its international duties.
