Transcript of the Conference Call on the Release of the IMF Staff Report on the First Review under the Extended Fund Facility Arrangement for Pakistan

IMF News, December 23, 2019

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Transcript of the Conference Call on the Release of the IMF Staff Report on the First Review under the Extended Fund Facility Arrangement for Pakistan

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• Published: December 23, 2019

Summary of the first review

• Date of transcript: December 23, 2019.
• Call participants identified:
  • PRESS OFFICER: Olga Stankova; Phone: +1 202 623-7100Email: MEDIA@IMF.org; @IMFSpokesperson
  • Ernesto Ramirez Rigo, Mission Chief for Pakistan, Middle East and Central Asia Department
  • Olga Stankova, Special Assistant to the Director, Communications Department
• Embargo timing: the call and the documents were under embargo and "will made public at 10:00 a.m. Washington, D.C. time."
• Overall assessment: program implementation "have been on track for the first review."
• Performance criteria: "All the performance criteria for the targets of the first quarter were met or exceeded, in particular those on the external sector, foreign currency reserves and NDA, likewise on the fiscal side."

Economic outlook and recent adjustments

• Outlook relative to program approval: "remains unchanged relative to what we had at the time of the program approval."
• Noted deceleration of economic activity was "as was expected at the time of program approval."
• Revisions mentioned:
  • One revision for inflation: "we have slightly lower" inflation, attributed in part to "some of the pass through from the exchange rate adjustments has been more moderate than we anticipated."
  • Adjustment to export-import composition of the current account, "but without any major substantial changes in the total current account deficit share of GDP that we expect to see this year."
• Early program results highlighted: "a major improvement in the external position of Pakistan" and "a very smooth transition to market-determined exchange rate."

Key structural priorities and benchmarks

• Emphasis on forward-looking policies and authorities' commitment to program objectives; structural reforms now a central focus.
• Three highlighted areas for ongoing progress:
  • Quality of fiscal adjustment:
  • Need for improvement to be permanent and underpinned by "continued work on the tax revenue side, rather than just on total revenue increases, or containing expenditure."
  • Program design is "based on tax revenue mobilization and not so much on reducing expenditures."
  • Rationale: Pakistan "is still lacking in the area of development spending, such as infrastructure," and fiscal space is needed to meet development needs.
  • Tax policy reforms are "of relevance for the following year budget."
  • Tackling circular debt in the energy sector:
  • Authorities "have put together a comprehensive strategy to address the flow and now this strategy has started to be implemented."
  • NEPRA legislation: "there is need for the NEPRA Legislation, that is regulators for the energy sector, to have more automaticity and the capacity to implement when necessary (inaudible) to support the reduction in circular debt."
  • NEPRA legislation is "a benchmark for the end of December, and we look forward to look at those reforms."
  • Central Bank independence:
  • Legislation on central bank independence "is now a structural -- submitted legislation is now a structural benchmark for March."
  • Originally set for "the end of December 2019," the benchmark was moved to March after additional technical work and assistance from the IMF Legal Department to make it "more feasible, and still very ambitious."

Implementation process and timeline notes

• Explanation of internal IMF processes for Board consideration:
  • After staff-level agreement, documents undergo internal review "that normally takes about a couple of weeks to be completed once management approves."
  • "The document is issued to our IMF Board, which requires a minimum calculation period of two weeks."
  • Board approval timing noted: "we manage to get to Board on December 19."
• Rationale for timing: delay between staff approval and Board approval reflects internal review and calculation periods, not implementation delays by the authorities.

Concerns and areas requiring sustained attention

• Fiscal area highlighted as the principal concern going forward:
  • Focus on the "quality" of fiscal adjustment, not only headline improvement.
  • Desire to "minimize the impact of the adjustments on economic growth," hence emphasis on tax revenue mobilization over expenditure cuts due to larger multipliers associated with spending.
  • Political economy challenges: "that's an area which is not easy, it's very tough, there are many political economic issues around that."
• Monitoring of structural benchmarks in forthcoming reviews (NEPRA, Central Bank legislation, tax policy reforms, energy circular debt strategy implementation).

Transcript of the Conference Call on the Release of the IMF Staff Report on the First Review under the Extended Fund Facility Arrangement for Pakistan — December 23, 2019 — IMF Communications Department

References

• Pakistan and the IMF
• Transcripts
• PRESS CENTER
• https://www.imf.org/en/home