ISLAMABAD: The government has promised with the International Monetary Fund (IMF) under Extend Fund Facility (EFF) programme to raise economic growth gradually to near five percent by 2015-16 as macroeconomic stability was entrenched and structural reforms were pursued.
The economic growth target was associated with various other conditionalities, which may help the government of Pakistan to achieve the desire target. It also promised to provide macroeconomic stability and improve economic performance during the term of the programme, official sources told Daily Times on Saturday.
The government promised increasing State Bank of Pakistan reserves to over three and a half month of imports by 2015-16.
To achieve the IMF targets, the government agreed to liberalise the trade regime and reform public sector enterprises through restructuring and privatisation and also to improve the business climate.
Sources claimed some of the major reforms undertaken under the IMF programme include stability in the balance of payments position through improved international image as evident from over-subscription of the euro bond and increased inflows from other multilateral and bilateral institutions.
The government promised for broadening tax base through elimination of tax reforms and it was done under annual budget for year 2015-16. The government agreed for increased coverage by Benazir Income Support Programme, which was already reaching 4.7 million women by end of June 2014, the sources maintained.
Pakistan promised with the IMF for National Energy Policy to decrease the cost of electricity, tariff rationalisation, improvement in power distribution companies (Discos) line losses, Energy Conservation Act finalisation and generation of generation companies (GENCOS) added 700 megawatts (MW) of electricity to the national grid system.
The officials claimed improved financials and circular debt clearing added 1,700 MW of electricity to the system.
The sources claimed improvement in investment climate through Corporate Rehabilitation Act and improvement in access to credit already undertaken while the reforms of Pakistan International Airline, Pakistan Steel Mills and Pakistan Railways have been initiated and two successful capital market transactions of United Bank Limited and Pakistan Petroleum Limited have already taken place.
The government initiated phasing out of broad based subsidies into targeted subsidies and austerity measures to curtail current expenditure and add to capital expenditure.
Pakistan agreed with the IMF for efficient and equitable tax system with broadening of tax base, which would faster completion, while providing the needed resources to finance infrastructure and support the poor through targeted assistance.
The government will continue taking measures to reduce budget financing from the SBP and will remain committed to enhancing the effectiveness of public debt management operations.
The government also agreed with the IMF in energy sector reforms including three years plan for phasing out the Tariff Differential Subsidy (TDS) to continue to bring tariffs to cost recovery level, the notified tariff would reduce the electricity subsidy to 0.5 percent of the Gross Domestic Products for fiscal year 2014-15. Prioritise the use of gas and coal rather than fuel oil in electricity generation and remain committed to a transition to market-based allocation of natural gas in the medium-term.
The government agreed to accelerate the development of domestic natural gas and continue to limit further expansion of the gas distribution networks for domestic consumption.
The government agreed for maintaining the priority ranking of the power sector to second (after domestic consumers) and continue to divert the excess supply of gas to the most efficient power plants.
The IMF demands for gradually rationalise gas prices to encourage new investment, promote efficiency in gas use and assurance there will continue to be no fiscal cast from the gas sector.
The sources claimed under the reforms by the government that led improvement in several economic indicators including improved economic activity by an increased GDP growth rate at 4.1 percent and inflation reduced to single digit ie 9.5 percent.
Increased tax collection by 16 percent as compared to the last fiscal year and tax to GDP ratio improved from 8.2 percent to 11 percent in the medium term.
Foreign exchange reserves improved from $9.817 billion at the end of September 2013 to $13.99 billion at the end of June 2014.
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