ISLAMABAD, March 2: Adviser to the Prime Minister on Finance Shaukat Tarin said on Monday that the International Monetary Fund would release the second tranche of $840 million from its $7.6 billion package by the end of March.

Briefing newsmen on macroeconomic indicators, he said the IMF was satisfied with some tax reform measures and the government’s nine-point economic agenda.

He called the economic bounce-back “help from God, Who has been very gracious”.

He, however, warned his “politician brothers” to ensure “political stability for God’s sake” if they wanted to enable the government to achieve the targets of its 24-month economic plan that included 4 per cent GDP growth in 2009-10 compared to this year’s 2.5 per cent and ensuring 6 to 8 per cent growth in coming years.

Answering a question, the adviser said during the quarterly review meetings held in Dubai last week, the IMF had not expressed concern over “political turmoil” in Pakistan. However, it did not mean that law and order and political instability would not affect government’s efforts to achieve economic targets, he added.

“Why should we wait or look to the IMF or any other body to warn us about the economic fallout of a political turmoil. We ourselves know how much vital security and political stability are for economic development.”

Mr Tarin said fiscal deficit would be reduced to 4.3 per cent this year from last year’s 7.4 per cent. Inflation which grew to 23 per cent last month and 20 per cent overall would be retained at 10 per cent on June-to-June basis, he added.

He said current account deficit was estimated to remain at 6 per cent this year and it would be brought down to 4 per cent in 2009-10.

Budget deficit, estimated at Rs261 billion, has been curtailed to Rs249 billion.

Mr Tarin said revenue collection target of Rs1,360 billion would be missed by Rs60 billion and the tax-to-GDP ratio of 10.2 per cent would not be achieved.

“Even if we stretch the tax base further, tax-to-GDP ratio will stay under 10 per cent,” he said. “Everybody cannot be taxed as there should be no undue taxes.”

Mr Tarin said inflation, the “worst enemy” of people and economic growth this year, would be brought down to single digit next year.

The government has agreed with the IMF to eliminate subsidy on electricity by June 30, which means that the National Electric Power Regulatory Authority will have to increase power tariff by about 20 per cent from April or May.

Answering a question, he said that following the countywide protests against 31 per cent power tariff hike in September last year, the government had decided to include “efficiency factor” of distribution companies and the decrease in price of furnace oil while approving any final increase in power charges in coming months.

Mr Tarin said the government intended to bring down the interest rate on bank loans to help new businesses and industrial growth. He said the State Bank had increased interest rate by 2 per cent to 13 per cent to meet one of IMF’s conditions for the release of funds. The IMF had proposed a 5 per cent increase, he added.

He said the government was not in favour of increasing discount rate because it had predicted decline in food and oil prices, a factor that had jacked up the trade deficit. And now it appeared that the government was right and hence it would decide to bring down the discount rate, he added.

He said Pakistan’s external and internal loans were around 56 per cent of the Rs13.384 billion GDP this year against 55 per cent last year, but this would be brought down next year.

Mr Tarin said the government was trying to bring down sugar price from Rs48 to Rs38 per kg by releasing 100,000 tons to Utility Stores every month and by taking some other measures.

He said mill-owners had not made timely payments to growers last year because of which this year’s sugarcane production was less than the local requirement and hence the government had allowed the import of sugar.

He said Pakistan would lobby for enhancing IMF funding to “eight times of its quota” at its executive board meeting to be held in April. The $7.6 billion IMF package was five times Pakistan’s quota.
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