Following a meeting with Pakistani authorities in Dubai over the past week to discuss the IMF’s $7.6 billion standby agreement with the country, the IMF agreed to raise the deficit target for fiscal year 2009-2010 to 4.6 per cent of gross domestic product from 3.4 per cent.
‘The slowing economy, additional donor support and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009/10,’ the IMF said in a statement issued in Washington after its mission returned from the region.
Shaukat Tarin, the prime minister’s financial adviser, held two rounds of meetings with IMF and World Bank officials over the past two weeks.
President Asif Ali Zardari too met senior IMF and World Bank officials in Washington last week, discussing various measures to help stabilise economy.
President Zardari and his Afghan counterpart Hamid Karzai also held a joint meeting with the World Bank president and agreed to expedite efforts to promote electricity trade between South and Central Asian regions.
On Monday, the IMF noted that Pakistan remained on track to fulfil conditions under the IMF-sponsored programme.
‘While the external current account deficit has started to narrow and inflation has declined, the drop in the demand for exports and uncertainty regarding the prospects for workers’ remittances pose risks to the external outlook,’ it said, noting that the international assistance would enable the country to pursue counter-cyclical policies.
‘The authorities and the IMF team agreed the Tokyo package should be regarded as a bridge towards the stronger medium-term revenue effort,’ the fund said.
‘In this regard, it is crucial to reinforce efforts to increase the tax revenue-to-GDP ratio through tax policy and administration reforms.’
The IMF plans to complete discussions on the second review of Pakistan’s programme over the next few weeks.
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