ISLAMABAD: The Internat­ional Monetary Fund (IMF) on Friday extended two waivers to Pakistan on missing performance targets to facilitate conclusion of 8th quarterly review, leading to disbursement of $502 million early next month.

The two sides led by Finance Minister Ishaq Dar and IMF mission chief to Pakistan Harald Finger have been in talks since July 29 in Dubai and reached an agreement that condoned Islamabad’s inability to remain within committed fiscal deficit limit and borrowing from the central bank.

The government missed the 4.9 per cent fiscal deficit target by about 0.4pc to 5.3pc of GDP and could curtail its borrowing from the central bank below Rs1.865bn billion by end-June 2015. The deficit failure was attributed by Dar to violation of the provinces to provide committed cash surplus. The government also could not meet two indicative targets for end-June period regarding tax collection and containing circular debt.

“After productive discussions, the mission and the Pakistani authorities have reached staff-level agreement on the completion of the 8th review under the Extended Fund Facility (EFF) arrangement. The agreement is subject to approval by the IMF management and the executive board.

“Upon completion of this review, SDR 360 million (about US$502m) will be made available to Pakistan,” IMF mission chief Mr Finger said.

Speaking at a televised presser, Dar said the successful completion of negotiations will lead to release of 9th tranche and was “indicative of government’s commitment in implementing structural reforms in areas of taxation, energy, monetary and financial sectors and public sector enterprises.”

Informed sources told Dawn that Dar has assured the IMF mission that the government will be taking additional measures to make up for the revenue loss arising out of reduction in withholding tax rates on banking transactions and build additional allowances in the electricity and gas tariffs over the next two weeks.

The IMF said the near-term risks had significantly reduced with substantial narrowing of the budget deficit and rebuilding of the foreign exchange buffers. “In the period ahead, consolidating these gains and focusing the reform efforts on overcoming structural challenges still facing Pakistan will be important to achieve higher exports, investment, jobs, and growth,” said Finger.

The IMF welcomed the authorities’ plans to continue strengthening public finances and external reserve buffers, and to accelerate efforts to widen the tax net to create space for infrastructure investment and social assistance.

In addition, efforts continue to restructure loss-making public enterprises, including through strategic partnerships with the private sector, advance the energy sector reform, improve the business climate, and further expand coverage under BISP to protect the most vulnerable.

Dar said the government met end-June 2015 Quantitative Performance Criteria on the SBP’s Net International Reserves, Net Domestic Assets, and foreign currency swap and forward position and the indicative target on power sector payment arrears.

He said the provinces could not give surplus as agreed which led to missing the quantitative performance criteria on the fiscal deficit and government borrowing from the SBP.

“While the indicative target on tax revenue was missed by a small margin, revenue collection for 2014-15 improved by around 15pc as compared to the last financial year,” he said, adding that the IMF had projected a growth rate of 4.5pc for this fiscal year against the government target of 5.5pc in view of China Pakistan Economic Corridor expected to play a significant role in stimulating economic activity.

He aid the inflation continued on downward trajectory as the headline inflation (CPI) fell from 8.6pc in FY13 to 4.5pc in 2014-15. In July 2015 it fell to a 12-year low of 1.8pc as compared to 7.9pc of the corresponding month of last year.

Robust growth in workers’ remittances and low oil prices continued to help contain the current account deficit while foreign exchange reserves of the central bank stood at $13.82bn and that of scheduled banks at $5.05bn as of July 31, 2015.

He said the government continued with the fiscal consolidation and would achieve budget deficit target of 4.3pc this fiscal year along with reducing public debt and lay foundations of sustained economic growth.

Dar said the tax-to-GDP ratio increased from 9.7pc of GDP in 2012-13 to 10.4pc in 2013-14, and reached 11.02pc in 2014-15 by elimination of SROs, broadening of tax base and improved tax administration.

He said the efforts for broadening the tax base will be strengthened further by enhanced use of IT and information inflow from multiple sources while CNICs for individuals have replaced NTNs with effect from July 1, 2015 to widen the coverage of taxpayer’s facilitation.

Published in Dawn, August 8th, 2015

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