ISLAMABAD: Pakistan plans launching another international
bond in about 45 days to manage external vulnerabilities and said it
would do everything possible not to go for another IMF programme in any
circumstances.
This came on the conclusion of 10-day
comprehensive talks with the International Monetary Fund that identified
a couple of near-term challenges mostly arising out of pre-election
political instability but otherwise noted strong economic growth
prospects and healthy fundamentals.
The IMF welcomed
recent depreciation of the rupee, noted favourable economic growth
momentum supported by improved energy and security situation and
infrastructure investments but called for strengthening resilience,
greater exchange rate flexibility, fiscal discipline and tight monetary
policy stance.
Remarks come at the end of post-programme monitoring with the fund
The “government is fully focused not to let things reach a
stage where you need IMF programme. We will do every thing possible to
stop that,” Secretary Finance Shahid Mahmood told journalists as the IMF
mission led by Harald Finger confirmed separately that the authorities
did not seek or need another bailout from the IMF.
The
government raised $2.5 billion through two international bonds — sukuk
and eurobond — a few days ago. Mr Mahmood said the bond launching team
had the mandate from the federal cabinet to raise up to $3bn from the
international market but did not touch that level because it could have
increased the pricing.
“We have that facility available.
We can go to the capital market again in a month and a half”, he said,
adding that the IMF mission would submit its report on the assessment of
Pakistan’s economy to the executive board by February next year, but
why should the government wait for their advice.
The
finance secretary said the government missed targets on fiscal and
external fronts last year but had made every effort to retrieve the
situation, as revenues showed 19.5pc growth in five months against 8pc
of last year while all areas of expenditures were being kept under tight
control and all pillars of the government were being kept abreast of
the situation to ensure that fiscals do not land at the last year level
when it ended up 5.8pc of GDP fiscal deficit instead of targeted 3.8pc.
He
declined to commit exact size or type of the bond saying instruments
could be different and financing needs would vary depending on
discussions with other multilateral lenders like the World Bank and the
Asian Development Bank but said the new bond in the international market
would be of 5, 7, 10 or 30 year tenure depending on the market
situation.
In extreme circumstances, the secretary
finance said the government could also arrange commercial financing but
that would always be the lost resort.
Responding to a
question, he said the external needs were not out of control but would
depend on export growth and measures taken to control imports.
He
said the exports in five months of current year have grown by 11.8pc
after declining for four years continuously and imports were showing
signs of contraction after imposition of regulatory duties while recent
currency devaluation would also affect import growth.
Remittances
on the other hand also showed 1.3pc growth in first five months after
last year’s fall. He said the government had missed targets for fiscal
deficit and current account deficits last year by a margin but was
taking all possible measure to ensure that situation was not repeated
again. He said the external needs were not out of control.
An
IMF mission visited Pakistan from Dec 5-14 for the first Post-Programme
Monitoring (PPM) since the end of Extended Fund Facility (EFF) in
September 2016 and held detailed technical discussions with senior
officials in the Ministry of Finance and State Bank of Pakistan,
ministries of energy, planning, commerce, privatisation, railways, and
the Federal Board of Revenue, Board of Investment and regulatory bodies
like Nepra, Ogra and SECP.
Going forward, the secretary
said the government would continue with fiscal consolidation without
taking steps to affect economic growth that was targeted at 6pc may stay
little lower. The IMF delegation put the growth forecast at 5.6pc of
GDP.
The secretary finance agreed that 4.1pc limit set
for fiscal deficit may slip as many factors had changed since the budget
was announced in June 2017. He said it would not be advisable to
restrict economic growth by cutting down on development because this
could impact job creation but revenue machinery had to do a lot more
during the current year for which a plan was on the prime minister’s
table.
Harald Finger told journalists that continued
exchange rate flexibility will be important to facilitate external
adjustment to support exports and economic growth. “Strengthening the
economy’s resilience will be important to maintain Pakistan’s favourable
growth momentum and ensure sustainable private investment and job
creation in the medium term”, he said.
But despite
accelerating growth and subdued inflation, the mission noted that
Pakistan faced important near-term economic challenges like surging
imports that cut down on reserves despite higher external financing. The
increase in the fiscal deficit last year has added to these trends.
Also,
it expressed concern over accumulating power sector arrears and wanted
the government to act decisively to address for prevent a further build
up of vulnerabilities and preserve Pakistan’s hard-won macroeconomic
stability.
The mission noted that a strong reform effort
was needed to maintain external stability, ensure debt sustainability,
and support higher and more inclusive growth in the medium term. This
included pursuing medium-term fiscal consolidation driven by accelerated
efforts to broaden the tax base, strengthening the monetary policy
framework and autonomy of the SBP besides careful phasing in of new
external liabilities to contain external stability risks, eliminating
the losses of public sector enterprises, improving the business climate,
and continued strengthening of the financial sector.
