Rs900bn fiscal gap: Deadlock persists between govt, IMF

Talks between Pakistan and IMF to be resumed

ISLAMABAD: Amid the lingering stalemate over the fiscal gap, the International Monetary Fund (IMF) has worked out a larger gap of approximately Rs900 billion, equivalent to 1% of the gross domestic product (GDP). It is a major stumbling block in striking a staff-level agreement.

However, Pakistani authorities have contested such a huge fiscal gap in achieving the primary deficit and asked the IMF for incorporating flow of reduction under the revised Circular Debt Management Plan (CDMP) and reduced amount of required additional subsidy of Rs605 billion against the earlier target of Rs687 billion.

Therefore, the fiscal gap stood in the range of Rs400 to Rs450 billion.

Officials have completely ruled out any possibility of IMF condition about the signing of Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan for reviving the Fund programme and said that no such discussions took place with the review mission.

“Differences still persist over ascertaining the exact fiscal gap between Pakistan and the visiting IMF review mission during the technical levels talks. Once it’s finalised with the IMF, then the additional taxation measures will be firmed up, which will be unveiled through the upcoming mini-budget. In view this of a lack of reconciliation over the figure of fiscal gap, the technical level talks will continue on Monday and then policy level talks are expected to commence from Tuesday,” sources confirmed while talking to a select group of reporters in the background discussions on Saturday.

They said the government agreed in principle with the IMF to abolish electricity and gas tariff subsidies for the export-oriented sector because such kind of dole out was completely unacceptable to the lender. The exporters’ scheme will be revised by bringing major changes to it, said the official. However, the IMF agreed to the Kissan Package and required a power subsidy, 60,000 tube-well subsidies for Balochistan and a subsidy meant for AJK.

The Pakistan authorities conceded that the power sector had so far proved to be a major stumbling block on the way to achieving smooth sailing. Although the circular debt for the gas sector also remained a problematic area, finally they managed to proceed on this issue. The expenditures overrun will breach the overall budget deficit target of 4.9% of GDP, which is likely to touch 6.5 to 7% for the current fiscal year.