ISLAMABAD, Jan 26: The International Monetary Fund has called upon the government to improve revenue collection in order to avoid cutting development budget for meeting the fiscal deficit targets.
“There is a need to increase revenues by 18 to 20 per cent of the GDP which are currently about 15 per cent of the GDP”, said Paul Chabrier, IMF Director for Middle East and South Asia.
Speaking at a joint news conference along with Minister for Finance Shaukat Aziz here on Saturday, the IMF director said that generally the government was doing well on all economic fronts. However, he stressed the need for improving revenues so that development budget did not become the casualty to offset fiscal deficit.
“Revenues can be increased by removing unnecessary exemptions and improving tax administration”, he said adding that he was told by the chairman CBR that all efforts were being made to cover up revenue shortfalls which were experienced due to Sept 11 events.
However, he said that the IMF will take notice of revenue shortfall if it occurred due to internal problems or any other weaknesses. “The reduction in revenues is understandable due to Sept 11 events but otherwise we will be very much concerned if the CBR fails to meet its revised targets”, he added.
“But I am happy to say here that the government has successfully developed an inbuilt elasticity to collect revenues”.
The IMF director appreciated the performance of the government and said that generally balance of payment position has been improved, gross foreign exchange reserves increased to $5 billion and inflation checked. He said exchange rate mechanism has proved to be quite effective due to which rupee gained strength viz a viz dollar. “This is a question of supply and demand an I am happy that there is no government intervention for determining dollar/rupee parity”, he said. Mr Chabrier also appreciated that the issue of fixing petroleum prices has been left on market forces and now there was no problem of petroleum surcharge.
When asked about his concerns, he said that IMF was disturbed about the tension on borders which needed to be reduced so that Pakistan could concentrate on improving its economy.
Earlier, he said, situation in Afghanistan had affected the economies of the world including that of Pakistan and now India and Pakistan tension was causing problems. “I have a very serious concern on the situation on borders”. He appreciated that despite problems, Pakistan government was effectively and boldly managing various issues including paying a lot of attention on poverty reduction.
“Another good thing I am told here is that there will be no complacency on the part of the government to address serious economic issues”, he said.
Mr Aziz said that he has discussed the wide range of issues with the IMF director and added that the next IMF review mission will be here in week’s time to further discuss PRGF targets.
He said the government was happy to have all possible support of the IMF to meet its various targets aimed at improving the overall economy of the country.