PM Khan leaves for World Government Summit in Dubai
Prime Minister Imran Khan on Sunday set off on a day-long visit to Dubai where he will participate in the World Government Summit, the Foreign Office spokesman told DawnNewsTV.
The annual gathering of heads of states and governments, policy makers and experts will provide an opportunity to discuss improvement in governance through reform, innovation and technology, Radio Pakistan reported.
According to the Foreign Office, the premier is making the visit at the invitation of United Arab Emirates Prime Minister Sheikh Mohammad bin Rashid Al-Maktoum.
Khan is expected to meet International Monetary Fund chief Christine Lagarde on the sidelines of the summit to discuss the conditionalities that have held up the accession to fund’s bailout programme. He is also expected to meet the UAE crown prince and other top leadership.
The prime minister will be accompanied by Foreign Minister Shah Mahmood Qureshi and Finance Minister Asad Umar, PTV News reported.
The premier’s participation will underscore Pakistan’s strong interest in the knowledge economy, green development and the importance of innovation for growth.
In his key note address at the summit, Prime Minister Khan will highlight his vision for a strong and prosperous Pakistan and will encourage investment in different sectors of the economy.
Foreign Minister Qureshi, while speaking to journalists before departing for the UAE, said that governance is an important issue in the region in general and Pakistan in particular.
He explained that bad governance has created a lot of problems currently being faced by the country. He said that the premier has been trying to introduce a fresh model and reforms for improvement in the performance of institutions.
Talking about the meeting with the IMF chief, he said that Islamabad wanted to proceed with the bailout package under conditions that would not add an unjustified burden on the common man.
Stumbling issue in IMF bailout talks
The IMF is asking for an adjustment of around Rs1,600-2,000 billion over three to four years. It also wants some corrective measures to put Pakistan’s economy on the right track after witnessing the highest-ever current account deficit.
But the stumbling issue in the talks is the pace of adjustments in the current expenditure. The emphasis on current expenditures comes as a result of a focus on what is known as a ‘primary balance’ in the parlance of public finance.
According to a senior official involved in the negotiations, there is some space for a cut in certain expenditures where Pakistan is in a comfortable position. “This agreement in cut will pave way for accession to the programme,” the official claimed, adding it will be a politically difficult decision.
A cut in the current expenditures still seems to put the government in awkward position by making adjustments in subsidies and other special grants.
The IMF has been demanding that the burden of any expenditure cuts should fall on current expenditures that include debt service, defence and subsidies. Previous governments decreased development expenditures when undertaking the Fund’s adjustment and usually left current expenditures alone (other than subsidies).
But the official said there is certain non-development spending which cannot be discontinued or reduced.
The primary balance of a government’s budget is the difference between revenues and expenditures after removing interest payments. It tests whether the path of debt accumulation of any country is sustainable or not.
If this is in deficit then it means that at least some of the interest payments due in the given year will have to be made through borrowing.
Cutting the primary deficit requires a cut in current expenditures, and usually becomes necessary when reducing debt-to-GDP ratio is a priority.
Finance Division’s Spokesperson Dr Khaqan Najeeb told Dawn that productive dialogue continues with IMF on all areas including fiscal, energy, structural reforms and monetary policy. Discussions are part of regular ongoing interaction between government and IMF and will continue in coming weeks as well, he said, adding that “technical level subject-specific discussions also support the process of overall dialogue”.
According to Najeeb, the government has already taken several policy measures including an increase in interest rate, gas and electricity tariffs along with revenue measures.
The Ministry of Finance recently announced that the Federal Board of Revenue’s (FBR) target would not be revised downward following a revenue shortfall of Rs191bn in the first seven months.
The FBR has been asked to take administrative measures including revival of tax on mobile phone cards to cover up the shortfall in reaching the budgetary target.
The Fund has also asked for further monetary tightening as well as a complete free float of the exchange rate.
“We are already towards target in these areas,” the official said, adding the IMF has acknowledged these measures.
According to the official, the finance minister has already conveyed to the IMF during recent parleys that only those measures will be taken which are favourable for country’s economic growth.
Although the government has secured breathing space through Saudi Arabian and United Arab Emirates loans, an IMF programme is essential to unlock access to resources from other multilateral lenders like the World Bank and the Asian Development Bank, as well as global capital markets.