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PAKISTAN'S VISION 2025
#15
GLOBAL VISION 2000 ASKS WHETHER KAPTAN HAS WHAT IT TAKES AS WELL AS THE CAPABILITY TO BREAK AWAY FROM THE STRANGLEHOLD OF A DESTRUCTIVE FINANCIALLY USURIOUS DEBT BASED FINANCIAL AND BANKING SYSTEM. THE ISLAM THAT HE IS UPHOLDING SAYS CATEGORICALLY THAT THIS USURIOUS SYSTEM IS SATANIC AND UNJUST AND NEEDS TO BE ENDED. THIS IS WHAT ISLAMIC LEADERSHIP DEMANDS AND HE WILL BE JUDGED ON HOW HE RESPONDS. HE CAN DECLARE HE AND HIS PTI GOVERNMENT IS NOT LIABLE AND RESPONSIBLE FOR THIS ODIOUS DEBT AND DEMAND JUBILEE. THE DEBT HAS TO BE CLEARED AND ELIMINATED. ANYTHING LESS WILL BE SUBSERVIENCE. ALSO WE ARE STILL TO HEAR DEMANDS TO ARREST THE BANKERS IN PAKISTAN FOR LEADING THE NATION DOWN THIS PATH OF RUIN. HE NEEDS TO BOWL FAST AND FURIOUSLY AND ENSURE THE BOWLING LEAVES THE BANKS WICKETS FLYING.  HE NEEDS TO ENGAGE NOW WITH THE FINANCIAL WAR THAT PAKISTAN IS LOSING. 
 

IMF ONLY VIABLE OPTION, PM IMRAN KHAN TOLD 

ISLAMABAD: An International Monetary Fund (IMF) bailout package remains the only viable option for Pakistan to arrest deterioration in macroeconomic situation and restore shattering confidence of markets, Pakistan’s negotiating team informed Prime Minister Imran Khan on Thursday.  Khan was chairing a meeting on the IMF programme, which was attended by Finance Minister Asad Umar, the State Bank of Pakistan (SBP) Governor Tariq Bajwa and Adviser to PM Dr Ishrat Husain. The briefing took place on the day when the SBP announced that official foreign currency reserves have dropped to nearly four years low of just $8.4 billion. Last time, on November 21, 2014, the country’s reserves had slid to $8.5 billion.

Pakistan needs to raise $20b to avoid payment crisis

A Pakistani team that held negotiations with the IMF from September 27 to October 4, briefed the PM about the outcomes of the talks, said sources in the Finance Ministry. The PM was said to be told that in order to restore confidence of the market the IMF was the only option.  The premier was also told that no major and continued financial relief was in sight from the friendly countries. On its part, the IMF has also reached to a conclusion that fund was the last viable option for Pakistan, as the Pakistani authorities could not share a concrete plan that could ensure smooth flow of dollars to meet international debt obligations, said sources in an international financial institution.

Pakistan is in search of at least additional $11 billion in next nine months to repay its old debts and finance the imports. The IMF team was led by its Washington-based mission chief Harald Finger. The Pakistani side was represented by officials from the SBP and the Ministry of Finance.  The PM did not immediately take a decision on putting a formal bailout request to the IMF. Sources said the PM is still hopeful that Saudi Arabia and China will temporary bailout Pakistan but claimed that recent developments in connection with the China-Pakistan Economic Corridor (CPEC) have made both Beijing and Riyadh uncomfortable.  Imran Khan will share his mind on the IMF package in the next few days, a senior government functionary told The Express Tribune on condition of anonymity.

IMF conditions

One of the reasons for pending a decision is the IMF’s harsh condition that Pakistan should adopt a free float exchange rate regime rather than the existing managed exchange rate. Under the managed exchange rate regime, the SBP is still pumping its already sacred foreign exchange reserves in market.  The sources said this is also one of the reasons behind $627million reduction in the reserves in just one week that ended on Sep 28, reducing the gross official reserves to just $8.4 billion. They said the IMF projected a fair value of rupee above Rs145 to a dollar as against the current rate of Rs125 to a dollar.

The sources said the second tough condition of the IMF is to increase the interest rates at least minimum 2.5% to 4%. At present, the key interest rate is 8.5%, which the IMF wants to see in the range of 11% to 12.5% to contain inflation and narrow down current account deficit.  During the concluding session, Asad Umar told the IMF that Pakistan will have to see whether the government can raise 4% interest rates. The minister also said the government would also have to review whether it can implement a free float exchange rate regime. Neither the finance minister nor the spokesman of the Ministry of Finance responded to the requests for comments.

IMF request for CPEC contract details declined

The sources said Asad Umar told the IMF team that Pakistan wanted to follow a structural reforms programme that could ensure sustained economic growth.  The IMF’s other conditions are enactment of the Public Finance Management law and a clear roadmap for implementation of Financial Acton Task Force (FATF) plan. The IMF also wants that Pakistan should lower the flow of the circular debt from over Rs625 billion to around Rs350 billion.  The IMF’s assessment is that if Pakistan did not immediately pick its option to handle the crisis, the balance of payments position would further worsen. The sources said in case Pakistan did not opt for an IMF package, some of the projected loans from the World Bank and the Asian Development Bank would not materialize. This would expand the financing gap beyond $12 billion.  
The IMF has termed recent fiscal and monetary adjustments by Pakistan inadequate. The IMF assessed that the budget deficit may widen to over 5.5% of the gross domestic product (GDP) or Rs2.1 trillion, even after the additional revenue measures introduced through a mini-budget.


GOVERNMENT HINTS AT RESORTING TO IMF BAILOUT DEAL 

Finance Minister Asad Umar. PHOTO: PTI

ISLAMABAD: Pakistan on Friday announced that it was ready to take ‘decisive corrective measures’ to put the national economy back on track, raising the prospects for early finalisation of an International Monetary Fund (IMF) bailout package, carrying huge political and economic costs. The Ministry of Finance issued an official handout that had striking similarity with IMF’s views. It indicated that the government had finally made up its mind to go to the IMF.  The handout was issued a day after the economic managers informed the Prime Minister that the IMF was the only viable option to steer the country out of its current economic crisis.

“Going forward, the government is committed to taking decisive corrective adjustments to restore the economy on a path of stability and growth,” stated the finance ministry.

IMF suggests higher interest rate, rupee depreciation

It said that the government believed that fiscal and price adjustments alone “are not sufficient”, and unless the much-delayed deep structural and institutional reforms were implemented “with (an) unflinching resolve, the entrenched imbalances plaguing the economy will keep resurfacing”.

“Additional decisive policy action, anchored in a comprehensive strategy, and significant external financing will be needed in the near term,” the IMF had stated after concluding its staff-level visit to Islamabad.  The Fund insisted that “policies should include more exchange rate flexibility and monetary policy tightening, further fiscal adjustment … strengthening the performance of key public enterprises together with further increases in gas and power tariffs”. The government has already increased gas prices by 143% and is set to increase power tariffs by at least 61%.

The IMF said that these steps would help reduce current account pressures and improve debt sustainability.  The IMF, it is learnt, urged Pakistan to follow a free-float exchange rate regime, besides increasing its interest rate to a minimum of between 11 and 12.5%. But these measures could undermine the PTI government’s plan to create 10 million jobs in the private sector and building five million housing units.

The IMF 
said that Pakistan was facing significant economic challenges, with a declining economic growth, high fiscal and current account deficits, and low levels of foreign exchange reserves.  Official forex reserves plunged to $8.4 billion by September 28 this year, hitting the lowest level in nearly four years. The finance ministry said that the IMF mission had highlighted imminent challenges facing Pakistan’s economy, including accumulation of losses in public-sector enterprises, non-execution of structural reforms, weakening of institutions and lack of domestic resource mobilisation, among others.

The finance ministry said that corrective measures recently taken by the government in the mission’s view were steps in the right direction. But it added that the visiting team was of the view that further actions were required for correcting major economic imbalances.

According to the finance ministry, the PTI government had inherited a fragile economy since critical economic decisions were delayed by the previous government in an election year. Prompt decisions on monetary, exchange rate and fiscal policies could have averted the economic downturn that Pakistan was now facing, it added.

The ministry underlined Pakistan’s commitment to protecting the poor and vulnerable segments of society, promising to invest more in social protection, human development and job creation to ensure that the burden of adjustment was not unjustly imposed on the weaker segments of society.

Pakistan needs to raise $20b to avoid payment crisis

This statement suggested that the finance ministry was ready to increase interest rates, devalue rupee and levy more taxes to qualify for the IMF programme.  The IMF also stressed that once stabilisation started to take hold, the focus should increasingly shift to reforms to foster sustained and inclusive growth, strengthening key institutions.

Priority areas, it said, included modernising the tax system and public financial management, strengthening fiscal federalism arrangements, improving governance and eliminating losses of public enterprises, enhancing the SBP’s autonomy, intensifying AML/CFT efforts, improving the business climate and anti-corruption efforts, and fostering the economic inclusion of the poor, youth, and women.

The IMF said that the PTI government’s recent policy measures were steps in the right direction, but insufficient. “Decisive policy action and significant external financing will be needed to stabilise the economy,” it said.  The IMF said that Pakistan’s current economic situation reflected the legacy of an overvalued exchange rate, loose fiscal policy and accommodative monetary policy adopted in the past.



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RE: PAKISTAN'S VISION 2025 - by globalvision2000administrator - 10-05-2018, 09:57 PM

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