Pakistan awaits IMF team to fix collapsing economy amid sparring over Kashmir

Pakistan's economic condition and its slowdown is evident from the upcoming visit of an International Monetary Fund (IMF) team to the nation this month.

The IMF team will visit Pakistan in between Sept 16-20 as part of Islamabad's technical work program, sources said.

According to The News International report, the IMF team will discuss fiscal issues with special focus to restrict target of primary deficit within the desired limits. 
Pakistan has initially tabled the option of renegotiating targets envisaged under the IMF programme in the context of emerging new realities on fiscal front as the FBR’s quarterly target has been requested to revise downward from Rs 1.071 trillion to over one trillion rupees for end Sept  2019.

“Yes, an IMF technical mission is coming to Pakistan within this month,” confirmed top official sources while talking to The News International.

They said that the upcoming technical mission will be providing assistance to Ministry of Finance and other ministries/departments on tax and non-tax revenue collection, fixing cash bleeding state-owned entities and devising strategy on issues related to central bank front, reported the newspaper.

Earlier, IMF had approved US$6 billion 39-month EFF arrangement for Pakistan. This was the 13th bailout the South Asian country received since 1980s.

The last time Pakistan government got a bailout from IMF was in 2013.

"On July 3, 2019, the Executive Board of the International Monetary Fund (IMF) approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4,268 million (about US$6 billion or 210 percent of quota) to support the authorities’ economic reform program," read a statement issued by the IMF earlier.

"The EFF-supported program will help Pakistan to reduce economic vulnerabilities and generate sustainable and balanced growth focusing on: a decisive fiscal consolidation to reduce public debt and build resilience while expanding social spending; a flexible, market-determined exchange rate to restore competitiveness and rebuild official reserves; to eliminate quasi-fiscal losses in the energy sector; and to strengthen institutions and enhance transparency," it said.

In the meantime, Pakistan's budget deficit has moved up to touch the highest point in almost three decades.

The deficit increased to 8.9% of the nation’s gross domestic product in the year ended June compared with 6.6% a year earlier, according to provisional numbers released by the Finance Ministry. That’s a big miss for the government, which targeted a narrower 5.6% gap, reported Bloomberg in August.

“It seems an uphill task,” Samiullah Tariq, director research at Arif Habib Ltd., was quoted as saying by Bloomberg in Karachi. “If they’re unable to meet the target for the quarter, then a mini budget to raise taxes is possible in order to clear the next IMF quarterly review.”  

The global rating agency Standard & Poor's (S&P) downgraded Pakistan from B to B- with a stable outlook in the first week of February due to diminished growth prospects.

Pakistan restores partial trade with India:

Pakistan had suspended all bilateral trade with India following the Narendra Modi-led government's decision on Article 370 in Jammu and Kashmir. But the recent partial restoration of trade by Pakistan despite Kashmir rhetoric, shows the chinks in its armour.

Pakistan also tried to give some relief to its patients by removing its self-imposed trade ban and allowed imports of life-saving drugs, Indian sources said.

"Political rhetoric has fallen short and Imran Khan government's ill planning is evident from the incident," a government source said.

 "Imran Khan government has bowed down under pressure," the source said.

Pakistan imports almost 50 percent of its raw materials for medicines from India.

 "These medicines include life-saving drugs for the cure of the diseases like cancer, tuberculosis, cardiac and others," the source said.

Kashmir Affairs:

On Aug 6, Indian Parliament passed a statutory resolution removing Article 370 from Jammu and Kashmir and the J&K Reorganisation Bill, 2019 which bifurcates the State.

Approval on Jammu and Kashmir (Reorganisation) Bill, 2019 makes J&K a Union territory with a Legislative Assembly, along with UT status to Ladakh without a Legislative Assembly.

Relationship between India and Pakistan had already touched new lows earlier this year following the Pulwama terror attack incident. Kashmir move of India added fuel to the raging fire.