When it comes to boosting taxes and increasing energy tariffs, Pakistan and the International Monetary Fund (IMF) are still attempting a ‘give and take’ approach in the final round of technical-level discussions to get the $6 billion Extended Fund Facility (EFF) back on track.
According to informed sources, the virtual talks between the two sides on Friday were abruptly extended for 8-10 hours at the last minute as they struggled to narrow down their hard positions to a level at which Finance Minister Shaukat Tarin could reach an agreement during policy-level talks with the IMF management and mission chief next week.
Pakistan’s revenue increase, according to the sources, has been labeled as “insufferable” by the IMF staff because it is expected to reverse as soon as efforts to curb imports take effect. Furthermore, the circular debt management strategy for the power sector was determined to be ‘unbankable’ in the absence of substantial tariff rises. The staff of the International Monetary Fund (IMF) desired significant progress on both fronts.
Those are the two most important areas where “give and take” must occur while bearing in mind the current economic conditions in the aftermath of an unclear Covid-19 status and the current international commodity price situation.
The IMF’s program has been on hold since March of this year due to disagreements between the two parties’ perspectives.
Meanwhile, the finance ministry questioned the World Bank’s estimations of Pakistan’s growth rate, which was estimated to be 3.5 percent for the current fiscal year and 3.5 percent for the previous fiscal year.
In a study released on Thursday, the bank predicted that Pakistan’s GDP growth will slow to 3.4 percent in the current fiscal year as a result of the unwinding of both expansionary and monetary policy measures.
“The World Bank’s predictions are based on an unrealistic evaluation,” the finance ministry stated, adding that the provisional estimate of GDP growth for FY2021 was 3.94 percent, with 2.8 percent growth in agriculture, 3.6 percent increase in industry, and 4.4 percent growth in service sectors. However, the growth in LSM (large-scale manufacturing) was estimated at 9.3 percent for the purpose of measuring GDP growth at 3.94 percent.
It takes two months for LSM data to become available, and the most recent data given by the Pakistan Bureau of Statistics (PBS) showed that LSM growth was 15.2 percent in the fiscal year 2021.
Aside from that, according to recent data on crops cited by the Federal Committee on Agriculture (FCA), the output of essential crops is higher than the amount assumed in the National Accounts for 2021.
According to the PBS data, wheat production has increased to 27.5 million tonnes from 27.3 million tonnes, while maize production has increased to 8.9 million tonnes from 8.5 million tonnes, resulting in a 3.94 percent increase in GDP growth.
GDP growth in FY2021 will rise further over 3.94 percent after taking into account the most recently available information, as opposed to the 3.5 percent predicted by the World Bank.
The finance ministry stated that the World Bank’s forecast of 3.4 percent GDP growth for the fiscal year 2022 was once again underestimated. As a result, it is predicted that GDP growth will continue close to 5% in the fiscal year 2022. A rapid rebound is projected globally, particularly among Pakistan’s main trading partners, and the ministry anticipates that this would translate into a rapid recovery in the home economy as well.
Domestically, the ministry stated that production of important crops was encouraging, with sugarcane output standing at 87.7 million tonnes (81.0 million tonnes last year), rice output standing at 8.8 million tonnes (8.4 million tonnes last year), maize production standing at 9 million tonnes (8.9 million tonnes last year), and cotton production standing at 8.5 million tonnes (7.1m tonnes last year).