The International Monetary Fund (IMF) is sending its SOS mission to Pakistan this month to suggest ways that the cash-strapped government could curtail the crashing budget deficit that the country is facing, according to a media report on Friday. In July, the International Monetary Fund (IMF) formally approved a $6 billion loan to Pakistan, which is facing "significant" economic challenges on the back of "large" fiscal and financial needs and "weak and unbalanced" growth.
The IMF team will visit Pakistan from September 16-20 to discuss fiscal issues, with a focus to restrict target of primary deficit within the desired limits, Teresa DabanSanchez, IMF Resident Chief in Pakistan, was quoted as saying by a news publication.
The decision was taken in the wake of the worsening financial situation of Pakistan's economy. The IMF's review was expected to take place in November. However, the decision to dispatch the SOS technical mission suggests that the IMF is not happy with massive slippages on the fiscal front, the report said.
"An IMF technical team is scheduled to visit Pakistan after Ashura Moharram probably from September 17 for staying here for 10 days," the report quoted official sources as saying.
A video conference was held between Pakistan and the IMF team, in which global lenders' staff expressed their concerns over budget deficit on Wednesday. This meeting proved all the projections made by the IMF and Finance Ministry wrong while they negotiated the $6 Bn deal under 39 month extended Extended Fund Facility (EFF).
Pakistan had initially tabled the option of renegotiating targets under the IMF programme in the context of emerging new realities on fiscal front as the Federal Board of Revenue's (FBR) quarterly target to revise downward from Rs1.071 trillion to over one trillion rupees for end September 2019. The Pakistan team stated that the FBR faced shortfall owing to various policy issues and economic slowdown.
They said that the upcoming technical mission will be providing assistance to the Ministry of Finance and other ministries/departments on tax and non-tax revenue collection, fixing cash bleeding state-owned entities and devising a strategy on issues related to central bank front.
The IMF team inquired about the reasons for the escalation in the budget deficit as both sides had estimated in April 2019 that the budget deficit might touch 7.2% of GDP for the last fiscal year 2018-19 so this projection became the basis of the IMF programme with the primary deficit projected at 1.8 percent of GDP.
"When the basis of IMF programme has shaken what is the guarantee that the envisaged targets for the current fiscal year will be materialised," the IMF side raised question.
Pakistan has also received billions of dollars in financial aid packages from friendly countries like China, Saudi Arabia, and the UAE in recent months. According to the Economic Survey 2018-19, Pakistan's economy grew at an average rate of 3.29% in the fiscal year 2018-19 against an ambitious target of 6.2% set in last year's budget.
IMF provides financial assistance and advise to member countries. IMF is the biggest public lender, along with sister organisation World Bank. It is a specialised agency of the United Nations, which is run by 186 member countries. Any country can become its member that conducts foreign policy and organisation's statues. The lender, IMF was born at the end of World War II out of the Bretton Woods Conference in 1945. The purpose was to prevent economic crises such as the Great Depression.