ISLAMABAD: While risks to the programme outlook remained high, the IMF has modified its structural benchmark for submission of amendments to Nepra Act before Parliament for end December 2019 by reinstating the power of government to levy surcharge.
According to the IMF report on Pakistan released on Monday night, the authorities have made progress onend-December structural benchmarks (SBs). The amendments to the National Electric Power Regulatory Authority (Nepra) Act are being prepared; international auditors have been selected to conduct the audits of Pakistan International Airlines and Pakistan Steel Mills; and the benefit structure of Waseela-e-Taleem was updated in October.
Notwithstanding the encouraging start of the programme, the IMF states that risks to the outlook remain high. Growth is currently weak and significant fiscal adjustment is needed in the coming years.
The IMF stated while the risk of a disorderly adjustment has abated due to the well-managed transition to a market-determined exchange rate and the availability of external financing, risks to the economic outlook are significant. Fiscal slippages and, more generally, resistance to reform from vested interest groups could undermine the programme's fiscal consolidation strategy and put debt sustainability at risk.
Moreover, the absence of a majority by the ruling party in the Upper House may hinder the adoption of legislation needed to achieve programme objectives. Also, provinces may under deliver on their commitments to budget parameters and related objectives over the programme period.
Lukewarm progress on structural reforms especially those aimed at strengthening governance of economic institutions may result in stagnant economic activity and little tangible benefits for the population, intensifying pressures to backtrack on policy commitments. Failure to meet programme objectives could jeopardize the availability of external financing. Also, a potential blacklisting by the Financial Action Task Force (FATF) could result in a freeze of capital flows and lower investment to Pakistan. Finally, the global economic backdrop poses increasing headwinds and weaker than expected activity may affect growth and current account deficit projections.
Against all these risks, the authorities' steadfast commitment to the programme and decisive policy and reform implementation could lead to a faster recovery.
Policy Recommendations: The IMF says that full—and timely—implementation of programme commitments is critical to strengthen macroeconomic stability and support robust and balanced growth. Fiscal discipline, including by provinces, needs to be sustained while efforts should continue to expand the social safety net.
The market-determined exchange rate should be maintained to support external stability and buildup of international reserves. The action plan to reduce arrears in the power sector should be timely implemented to support the sector’s viability and limit fiscal risks. Financial sector reforms should focus on deepening access to financing and strengthening resolution frameworks. Additional structural reforms to strengthen governance, including through critical improvements in the AML/CFT framework, are needed to improve the business climate and support private sector development.
All end-September, 2019 and continuous performance criteria (PCs) were observed. The· floor on net international reserves (NIR), ceiling on net domestic assets (NDA), ceiling on SBP's stock of net foreign currency swaps/ forwards, ceiling on net government budgetary borrowing from the SBP, and ceiling on the general government primary budget deficit were met by wide margins. The ceiling on government guarantees was also observed and no external public payment arrears were incurred.
However, five indicative targets (ITs) for end-September were missed. The IT on targeted·cash transfers spending was missed but is expected to be corrected by end-December.
The ITs on net accumulation of tax refund arrears and power sector arrears were also missed, but with the newly proposed ITs they are on track to be met by end-December.
Spending on health and education came in short of the target as, at the time the target was set, only very preliminary estimates of FY 2019 expenditures on health and education were available, especially at the provincial level.
Since the actual outturns turned out to be significantly lower, the IT on health and education has been revised accordingly to reflect the authorities' spending capacity. Nonetheless, the revised IT still envisages an increase in health and education spending as percent of GDP against FY 2019.
Net tax revenues collected by the Federal Board of Revenue (FBR) was also missed due to lower than expected customs receipts that have been negatively affected by the faster-than-expected external adjustment. Most structural benchmarks (SBs) have been implemented, albeit with delays.
The licenses·for the track-and-trace system for excises on cigarettes were issued in October (end-September 2019 SB), while the finalisation of BISP's banking contracts and launching the financial inclusion However, while there has been progress on measures to strengthen the effectiveness of the AML/CFT framework (end-October 2019 SB), this has not been completed.
from The News International - Top Story https://ift.tt/2ZlIN8l
0 comments:
Post a Comment