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IMF team discusses proposed PRGF with economic managers

TAHIR DHINDSA

ISLAMABAD: A seven-member International Monetary Fund (IMF) mission headed by its Director Sena Eken on Monday discussions with finance ministry officials for a proposed poverty reduction and growth facility (PRGF) which will be in the range of $2 billion to $3 billion.

The new programme will replace the suspended $1.6 billion Enhanced Structural Adjustment Facility (ESAF) for which about $914 million (SDR 682) were released. Since the focus of the new programme has been placed on poverty reduction, the mission, for the first time, will hold separate meetings with the social sector ministries, through which a major part of the three-year-long programme will be implemented.

Official sources told Business Recorder that the programme has been based on the new understanding of the Fund that real sustainable growth can only be achieved if it has positive effect on poverty reduction. But at the same time the conservative benchmarks will continue to figure prominently in the overall evaluation process, they said.

Sources said the government has not yet prepared the poverty reduction and growth facility paper (PRGFP), which will replace the policy framework paper (PFP), therefore, the actual allocation of the new $2 billion will not be discussed in detail in the present round of meetings.

In the absence of a finished PRGFP, the visiting IMF delegation will hold talks with individual ministries i.e. Ministry of Food and Agriculture, Ministry of Education and Social Development and the Ministry of Rural Development Local Bodies Labour Manpower.

The government will inform the delegation about various developments in different sectors and macro-economic framework development, after October 12, 1999.

Three main issues, which will figure prominently on the fiscal side in the discussions on macro-economic framework adjustments, will be fiscal imbalance, debt management and the current account deficit.

The current account deficit which swelled up to about $1.2 billion in the first eight months of the current fiscal year will also figure prominently in the discussions. The government blames the deficit for high oil prices in the international market. "It was due to adverse terms of trade," Finance Ministry official told Business Recorder. The government is in serious problems due to such a huge current account deficit. It had done its budget making exercise with oil prices at about $12.8 a barrel, which later on touched $30 per barrel mark.

The GST imposition at the retail level will be the top issue on the fiscal side. The government has done its homework through the Central Board of Revenue (CBR) and is totally committed to imposing it in the next budget through a two-phased programme.

On the Monetary side, the State Bank of Pakistan has already adopted quite a few measures. The real interest rates have been scaled down by almost two percent on average and further cut down is on the cards.

The rate of return on National Saving Schemes (NSS) has also been brought down by two percent and furthermore the institutional deposits have been withdrawn from it. And, with inflation at about 3.5 percent the monetary growth is strictly under control.

In Monday's preliminary meeting, SBP Governor Dr Ishrat Hussain and Finance Secretary General Moeen Afzal participated. Finance Minister Shaukat Aziz is likely to join the paralays after coming back from his current tour of Bahrain on Tuesday.