Pakistan Meets IMF Fiscal Conditions for Q1
Pakistan has met three major IMF fiscal conditions for the first quarter of the current financial year, keeping its budget consolidation on track, The Express Tribune reported. But the Centre received only Rs57.5 billion from the provinces, barely 6 per cent of the Rs1.035 trillion they promised for the year.
The Finance Ministry released the fiscal operations data for July to September on Friday, showing the federal government met the International Monetary Fund’s conditions on the primary surplus, tax collection and provincial cash surpluses.
The IMF fiscal conditions Pakistan met
The country met its primary surplus condition with room to spare, reporting Rs2.97 trillion against a target of Rs1.95 trillion, equal to 2.1 per cent of gross domestic product. The primary surplus is the balance before interest payments, and it is the IMF’s main gauge of fiscal discipline.
The Federal Board of Revenue also met its IMF target for the quarter, after splitting its sales tax and income tax functions into separate wings. Against a three-month target of Rs3.03 trillion, the FBR collected Rs3.089 trillion, beating the target by Rs60 billion. The provinces met the cash-surplus condition as well, generating a combined surplus of Rs599 billion, Rs83 billion above the IMF target.
The higher surplus came largely from booking the State Bank’s annual profit in full in the first quarter. The State Bank reported a profit of Rs1.932 trillion, down 20 per cent, or Rs495 billion, from a year earlier.
Provinces paid only 6 per cent of promised grants
Under an understanding reached in June, the four provinces agreed to give Rs1.035 trillion in cash grants for security and nationally important projects. The federal government has already approved Rs275 billion for six priority water projects this month.
Punjab gave Rs32.5 billion, Khyber Pakhtunkhwa Rs12.7 billion, Sindh Rs8.5 billion and Balochistan Rs3.7 billion. Khyber Pakhtunkhwa had publicly linked the grants to a meeting with the imprisoned PTI leader, Imran Khan.
The Centre deducted Rs35 billion from provincial grants earlier in November, adding to the friction between the two tiers of government.
The provinces missed the IMF condition on tax collection, generating Rs301 billion against the target, a shortfall of Rs88 billion. Three provinces recorded cash surpluses, but Balochistan ran a deficit.
Punjab recorded a surplus of Rs333 billion on revenue of Rs1.1 trillion and spending of Rs785 billion. Sindh booked a surplus of Rs181 billion after spending Rs510 billion, Khyber Pakhtunkhwa a surplus of Rs102 billion on income of Rs414 billion, and Balochistan a deficit of Rs16 billion after spending Rs191 billion. The provinces also reported statistical discrepancies: Rs13.2 billion in Punjab, Rs20 billion in Sindh and Rs35 billion in Khyber Pakhtunkhwa.
The four provinces spent about Rs1.8 trillion, including Rs1.34 trillion on development, against total revenue of Rs2.4 trillion, of which Rs1.9 trillion came from federal tax shares.
What the figures mean for the IMF programme
The IMF board is tentatively scheduled to meet next month to approve loan tranches worth $1.2 billion, according to Finance Minister Muhammad Aurangzeb. Meeting the conditions keeps the programme on track despite the early setbacks.
Non-tax revenue fell 14 per cent to Rs2.6 trillion, mainly because the State Bank profit shrank, and after September the FBR stood Rs95 billion behind its target for the first four months.
The federal government spent Rs3.1 trillion, but only Rs81 billion went to development. Interest payments reached Rs1.7 trillion, up Rs322 billion, or one-fourth, from a year earlier, and defence spending amounted to Rs495 billion.
Pakistan’s domestic debt fell to Rs57.7 trillion in the July-September quarter as the government retired bank borrowing. Pakistan recorded a budget surplus of Rs1.274 trillion in the first quarter, or 0.9 per cent of GDP, down about 40 per cent from a year earlier. It is the third straight year of first-quarter surpluses, after 23 straight years of first-quarter deficits.
Frequently asked questions
What IMF fiscal conditions did Pakistan meet in the first quarter?
Pakistan met three conditions: the primary surplus target, the FBR revenue target and the provincial cash-surplus target, according to the Finance Ministry’s fiscal operations data.
How much did the provinces pay the Centre?
The provinces paid Rs57.5 billion, about 6 per cent of the Rs1.035 trillion promised. Punjab paid Rs32.5 billion, Khyber Pakhtunkhwa Rs12.7 billion, Sindh Rs8.5 billion and Balochistan Rs3.7 billion.
Why did the primary surplus beat its target?
The primary surplus reached Rs2.97 trillion against a target of Rs1.95 trillion, mainly because the government booked the State Bank’s full annual profit in the first quarter.
What did the FBR collect in the first quarter?
The FBR collected Rs3.089 trillion against a target of Rs3.03 trillion, but after September it fell Rs95 billion behind its target for the first four months.
When will the IMF board meet on Pakistan?
The board is tentatively scheduled to meet next month to approve loan tranches worth $1.2 billion, according to Finance Minister Muhammad Aurangzeb.
