IMF says bailout program to get Pakistan out of boom and bust cycle

In this file photo, the International Monetary Fund (IMF) headquarters building is seen ahead of the IMF/World Bank spring meetings in Washington, US, April 8, 2019. (REUTERS)
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Updated 24 December 2019

IMF says bailout program to get Pakistan out of boom and bust cycle

  • Pakistan met 6 performance criteria, missed 5 indicative targets — IMF report
  • Slow growth rate may spark agitation in the country, analysts

KARACHI: International Monetary Fund IMF on Tuesday said with the achievements of all the performance criteria set for the first quarter the fund’s bailout program now moves to the structural reforms to get the country out of boom and bust cycle.
“We see that the authorities remain strongly committed to all the objectives of the program. We are now at the stage in the program where we move to the area of structural reforms. These are really important to build an institutional framework for the country so that there is no repetition of the boom bust cycles of the past,” Ramirez Rigo, Mission Chief for Pakistan at International Monetary Fund, said in a conference call.
The IMF mission chief identified the three areas for continued progress that Pakistan needs to focus including the quality of the fiscal adjustment that will require continued work on the tax revenue side, energy sector reforms for more automaticity capacity implementation by legislation for National Electric Power Regulatory Authority (NEPRA), and the independence of central bank.
The fund on Monday released report of the first review of the bailout program under which it agreed to extend $6 billion to Pakistan. The IMF has documented progressed made by the authorities and revised targets including the revenue collection target for current fiscal year.
Islamabad had targeted Rs 5.5 trillion tax collection for the current fiscal year FY20 through Federal Board of Revenue FBR but the fund projects agency’s tax collection would be Rs 5.238 trillion, showing a reduction of Rs 265 billion.
The report highlights that the country has met around 6 performance criteria while two are continuous and the Islamabad has missed 5 indicative targets that include cumulative floor on targeted cash transfers spending Benazir Income Support Program (BISP) as only Rs 5 billion were released against target of Rs 45 billion.
Real GDP growth is projected at 2.4% in FY 2020, but net exports are now expected to provide a larger contribution to growth mainly due to greater import compression. Growth is projected to strengthen to around 3% in FY 2021, and 4.5–5% over the medium-term.
Average CPI inflation is projected to decelerate slightly to 11.8 percent in FY 2020 as administrative and energy tariff adjustments are expected to offset the effects from weak domestic demand.
The Fund views that the Pakistan has made progress on Anti-Money Laundering and Combating the Financing of Terrorism AML/CFT deficiencies, although much remains to be done. With assistance from capacity development providers (including the IMF), the authorities are committed to completing the actions in the structural benchmark by end-June 2020.
Analysts say the funds appraisal is positive for Pakistan though some targets were missed. “We believe overall IMF’s staff appraisal is positive, though some indicative targets were missed. In fact, on some accounts (like Net international reserves (NIR), Net Domestic Assets (NDA),budget deficit), the authorities have achieved over performance,” Muhammad Sohail, senior financial analysts and CEO of Topline Securities, said.
Economists say the fund has identified the important area where if the government fails to focus the situation may lead to agitation. “The IMF has reported that the job creation is need which has been hampered by the slowing growth. The fund has expressed its concerns that it could lead to agitation as you already see due to inflation. The solution they have provided is that they have suggested to increase the allocation for development spending to create more jobs,” Dr. Vaqar Ahmed, Joint Executive Director of Sustainable Development Policy Institute (SDPI), told Arab News.
The IMF will hold the next review of the bailout program from March 6, 2020 for the disbursement of another $452.4 million tranche.


Karachi braces for weekend rains as billions lost to drenches this week

Updated 26 August 2020

Karachi braces for weekend rains as billions lost to drenches this week

  • Losses from Tuesday's flooding estimated at Rs5 billion ($30 million), Karachi traders say
  • Met agency says floodwater in Karachi must be drained immediately to prevent further flooding on Saturday

KARACHI: Another spell of heavy rain is expected to lash the port city of Karachi on Saturday, Pakistan's meteorological department warned, as it called on the city's authorities to drain water from flooded neighborhoods to avoid further damage and casualties.

Rain-related incidents in the past few days killed dozens of people in the coastal metropolis of Sindh province, while streets, homes and factories were flooded with sewage water, causing losses of billions of rupees in the city where the drainage and sewage systems are outdated.

"There will be a gap of two days (in rains). If it is not utilized to drain out the water from the affected areas, a light to moderate spell on Saturday will drown them again," Sardar Sarfraz, chief metrological officer of the Pakistan Meteorological Department, told Arab News.

On Tuesday, he said, a record 345 millimeters of rainfall flooded most of the city.

As flooding brought operations at the city's industrial zones to a standstill, Karachi Chamber of Commerce and Industry (KCCI) president Agha Shahab Ahmed Khan said the government should declare the rains a national disaster to allow people to be compensated.

Shaikh Umar Rehan, president of the Korangi Association of Trade and Industry (KATI) told Arab News that work has been heavily disrupted at the city's factories which normally operate non-stop.

“The factories work round the clock, but on Tuesday, even one shift couldn’t be completed,” he said.

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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According to Atiq Mir, president of the Karachi Traders Association, losses from damages to the markets in the old city area alone are estimated to be Rs1 billion.

"As trade volume is Rs4 billion per day, both direct and indirect losses make it Rs5 billion ($30 million). On Wednesday, as the markets could not open completely, the (trade) community will have to bear another Rs2.5 billion losses."

The Sindh government and the military say teams are on the ground to drain the water and rescue the affected.

“It has broken an 89-year record and it was continuously raining for eight hours but as soon as the rain stopped teams were on ground to clear the areas. Most of the city’s thoroughfares were cleared by the Tuesday evening. The entire Sindh government was in the field to supervise the relief work,” Sindh Labor Minister Saeed Ghani told Arab News.

He added that the problem will not be resolved within days.

The military's media wing said in a statement that relief and rescue efforts were underway in the heavily flooded Malir Nadi, Kohi Goth and Dur Muhammad Goth areas of the city.