ISLAMABAD: Amid a policy decision on Friday to allow rupee depreciation,
Pakistan and an International Monetary Fund (IMF) delegation concluded
the first round of discussions on the country’s economy. Now members of
the IMF delegation and Pakistan team are taking a two-day break to
prepare for the policy-level wrap-up by Dec 13-14.
A
senior official told Dawn that the State Bank of Pakistan (SBP) would
now let the currency exchange rate to adjust to market conditions after
many months, rather years, of resisting expectations. The timing of the
move was planned for Friday to ensure materialisation of $2.5 billion
worth of receipts from two international bonds launched last month.
This
calculated move allowed the currency rate to touch Rs110 to a dollar on
Friday before settling down at around Rs107 and did not go beyond
official estimates. The two weekend holidays would give a breathing
space instead of over-steaming the exchange rate.
The
sources said that the IMF had concerns over the health of Pakistan’s
external sector, but the government authorities had different opinions.
As the two sides concluded technical talks, the IMF team will prepare a
report of its assessment over the weekend and share with Pakistan
officials on Monday for the feedback and discussions.
While
the government team, led by secretary of finance Shahid Mehmood will
review the assessment, the IMF mission to Pakistan, led by Harald
Finger, will visit Lahore next week for talks with provincial
authorities including Chief Minister Shahbaz Sharif and independent
observers and researchers from the business community and
representatives of a private-sector university.
The
authorities believed the currency adjustment would help shift foreign
currency holdings from commercial banks currently standing at a higher
level of around $6 billion back to official reserves and help divert
remittances to official channels with declining gap among the official,
banking and open market rates.
For the first time after
many months, the central bank is reported to have noticed exporters to
offload their positions. In the long run, the recent imposition or
increase in the import duties and regulatory duties would make
unnecessary imports expensive.
An official said that
projections for CPEC-related repayments were within the range already
discussed by the two sides in connection with debt sustainability
analysis as $23 billion worth of projects were currently under various
stages of implementation, including $17 billion in the energy sector by
the private sector. About $6 billion worth of projects are in the road
sector.
While a clean certificate of economic health
from the IMF is useful for international financial institutions and
investment sentiment, the two sides are reported to have noted that
recent bond results were very positive for the fact that this was the
first fund raising from international capital market without the IMF
programme after many years and attracted favourable response and rates
despite high twin deficits, showing confidence of international
investors and good reflection of fundamentals.
The IMF
director of Middle East and Central Asian Department (MCD), Jihad Azour,
the former finance minister from Lebanon, will also join the final
round of talks next week. While the Pakistani side will continue to be
led by Mr Mehmood, a meeting of the IMF mission could also be arranged
with Prime Minister Shahid Khaqan Abbasi who holds the portfolio of the
finance minister, depending on the gaps in policy positions, a source
said.
Pakistan would continue to remain under the IMF’s
post-programme monitoring (PPM) until about 2023 for borrowing
significantly higher than its quota. The threshold for Pakistan to move
out of the PPM is estimated at 1.4 billion special drawing rights (SDRs)
of the IMF that now stand around 4.3 SDRs.
Secretary
Finance Shahid Mahmood, when contacted, said that the two sides held
various rounds of technical discussions over the last week and covered a
host of areas including macroeconomic situation, developments in
energy, financial, monetary and social sectors. He said that he shared
with the IMF delegation an overview of the economy which was on track
and key economic indicators were moving in the positive direction. He
said that significant growth had been achieved in revenue generation in
the current fiscal year.
He said that Pakistan had
achieved fiscal consolidation without compromising on expenditures on
development and social protection and the government had set its eyes on
achieving 6pc GDP growth which was inclusive, pro-poor and sustainable.
Mr Mahmood said that the recent successful launch of Sukuk and Euro
Bond were also discussed briefly.