Talks with IMF clear hurdles

ISLAMABAD: The government hinted on Thursday that a breakthrough had been made in its talks with a visiting mission of the International Monetary Fund (IMF) by resolving key economic issues to pave the way for consideration of its case by the fund’s executive board for the release of the next tranche of $1.7 billion.
An official said the government and the IMF had agreed on a revised federal budget envisaging a fiscal deficit of 4.7 per cent, 13.5 per cent inflation and 2.8-3 per cent economic growth rate.
“We have handed over revised budget estimates with a 4.7 per cent fiscal deficit target and they were satisfied with it,” said Additional Secretary for Finance Rana Asad Amin, who headed the government team on budget-related issues.
He told reporters that the original budget deficit target was four per cent of the GDP, but it had now been increased with mutual understanding to 4.7 per cent in view of the changed situation after the floods.
Mr Amin said the finance minister and the secretary had gone to Karachi for consultations with President Asif Ali Zardari and things had been settled.
He said the minister would hold a final round of policy-level talks with the IMF team on Friday and provide a roadmap for introduction of reformed general sales tax (RGST) and power sector reforms, including tariff and subsidy issues.
The official said the RGST law was likely to be approved during the ongoing session of the National Assembly.
In reply to a question, Mr Amin said the IMF wanted to know how the government would carry out commodity operations loaded as it was with a Rs436 billion circular debt, but it did not give policy directives on such issues.
The additional secretary said that about Rs200 billion would be repaid to the State Bank on account of commodity operations and the amount would recycle into fresh operations during the coming crop season.
Rana Asad Amin did not say if all issues had been resolved for the release of the remaining $3.6 billion, out of the $11.3 billion standby arrangement, but said the final discussions would be held on Friday.