Talks between Pakistan and the IMF: Punjab withholds surplus because of flood damage

Officials briefed the delegation on growth, inflation, remittances, exports, and losses from floods as part of the second half-yearly economic review talks between Pakistan and the International Monetary Fund (IMF).

The provincial administrations also participated in the talks; Punjab did not recognize their budget surplus because of floods.

Reviewing Pakistan’s macroeconomic performance is the goal of the current IMF-Pakistan negotiations. Officials predict that the growth rate will stay in the range of 3.7 to 4 percent, which is marginally less than the 4.2 percent goal outlined in the federal budget.

The fiscal year’s inflation rate is predicted to be 7%, and September’s inflation rate is anticipated to be between 3.5% and 4.5%. Officials from the Finance Ministry cautioned that recent flood losses might lead to a slow increase in pricing.

Note the anticipated remittances.

The IMF was informed by officials that remittances could surpass the budget objective of $39.4 billion and hit a record $43 billion for the current fiscal year.

It is anticipated that the increase in inflows will come from Pakistanis living abroad who are helping with rehabilitation and reconstruction, particularly in areas of Punjab and Khyber Pakhtunkhwa hit by flooding.

Flood damage and provincial issues

The IMF delegation also met with provincial government representatives. Citing significant damage from recent floods, Punjab declined to disclose its budget surplus and declared that its own funds would be utilized to aid the victims.

The preparation of an estimated damage report for Punjab is underway. According to preliminary estimates, Balochistan experienced minimal damage, while Sindh and Khyber Pakhtunkhwa suffered losses of Rs50 billion and Rs30 billion, respectively. Pakistan has been urged by the IMF to provide a comprehensive, consolidated flood damage report as soon as possible.

Financial difficulties

All four provinces must produce a budget surplus of Rs1,464 billion under the existing fiscal framework. However, there are concerns about reaching this year’s aim because last year’s surplus was Rs280 billion short.

Externally, the current account deficit is probably going to stay at about $1 billion, which is significantly less than the $2.1 billion goal. In the meantime, imports are expected to total $65 billion, while exports could reach $34.2 billion against a target of $35.2 billion.