Govt, IMF to review economic situation on Aug 23

[Thunder]

Govt, IMF to review economic situation on Aug 23

ISLAMABAD: The government has decided to go ahead with a scheduled review of economic situation with International Monetary Fund (IMF) on Aug 23 in Washington to take the international community into confidence over the fiscal and economic challenges posed by the devastating floods across the country.

A senior finance ministry official told Dawn on Sunday that the scheduled interaction with IMF would help the authorities to compare initial estimates of losses caused by the countrywide floods with the IMF and share fresh proposals to overcome economic challenges.

“Our considered view is that this is the right time to remain engaged with the IMF at this critical stage and get whatever leeway is possible in a sympathetic world environment on certain economic slippages, particularly on fiscal deficit, tax reforms, inflation and GDP (gross domestic product) growth rate,” the official said.

This should enable the government to get waivers on economic performance because of floods that may not have been possible in normal circumstances but the government will have to show its willingness to take tough economic decisions in an upfront manner, the official said. As a result, the government could be able to get a lump sum payment of remaining $3.3 billion of the $11.3 billion standby arrangement. The forthcoming review would also suggest whether Pakistan could get another soft programme from the IMF going forward, he said.

He said the government did not want to give an impression that its machinery had come to a standstill because of a natural disaster. The international community would hopefully appreciate conditions that the government had to live in and understand that people and the government were ready to move on with the life.

“At least they would appreciate that the government is operating even in difficult situations and ready to take challenges.”

The official said that Finance Minister Dr Abdul Hafeez Shaikh had given three week’s time to the World Bank and the Asian Development Bank to complete damage and need assessment (DNA) of the floods, which would be subsequently shared with the IMF and the international community for financial assistance and economic support.

Unless the DNA was available, the estimates of GDP losses and fiscal deficit could not be ascertained. The IMF has different methodologies for calculating the GDP than the government and the next review would be a good opportunity for exchanging ideas about GDP calculations. The immediate loss to the GDP would be in the form of stocks that have been lost in the floods and then far reaching effects of infrastructure damages and capital expenditure on their revival, rehabilitation and reconstruction.

The IMF would also be engaged to come up with fresh ideas on taking difficult economic decisions that had been delayed for quite some time but had become unavoidable because of a serious crisis-like situation. “The floods might have created opportunities for transforming the country both economically and politically and we should take advantage of them.”

He said at least five major areas had initially been identified that had suffered massive losses because of the catastrophe. These are crop losses, losses to the private sector and public properties, foregone income losses as a result of these properties, loss of public infrastructure like damage to Gomal Zam dam and some other dams and barrages, roads and bridges and big losses to power plants and refineries. He said no bridge in the Khyber Pakhtunkhwa on the roads along the Indus river was spared by the floods and massive funds would be needed for their reconstruction.

On top of that, the bigger loss to the public at large was in the form of increasing food prices, especially vegetables and fruits, because of flooding and supply disruptions. Electricity and other utility prices would add to this burden, the official said, adding all these issued had to be shared with the IMF for policy advice and financial and political support.