Consensus likely on macroeconomic, fiscal framework: government, PML-N teams'' meeting on January 26

The government and Pakistan Muslim League-Nawaz (PML-N) teams, scheduled to meet on January 26, are likely to reach a consensus on macroeconomic and fiscal framework, informed sources revealed to Business Recorder.
A political consensus would strengthen the government''s hands to convince the International Monetary Fund (IMF) team led by Adnan Mazarei to revive the stalled 11.3 billion dollars Standby Arrangement (SBA) with two tranches (3.2 billion dollars) yet to be disbursed.
Sources told Business Recorder here on Saturday that the IMF team might visit Pakistan on January 29 provided that the major political parties succeed in developing a consensus on macroeconomic and fiscal framework. The objective of the framework is to narrow the gap between revenues and expenditures to achieve a fiscal deficit in the range of 5.5 to 6 percent of GDP by end June 2011.
Sources maintained that government had cut down federal spending on development by Rs 100 billion - from Rs 280 billion earmarked in budget 2010-11 to Rs 180 billion due to financial constraints. This was a negotiated settlement between the Ministry of Finance (which proposed a total PSDP outlay of 150 billion rupees) and the Planning Commission (proposing a total PSDP of Rs 200 billion).
Sources said that the government envisaged cutting down public sector expenditures by 30 percent except salaries and pension in a bid to achieve its desired fiscal deficit target. On revenue side, the sources said, the FBR''s tax collection target of Rs 1667 billion was unlikely to be achieved. Under current circumstances, estimates of revenue collections are in the range of Rs 1550 billion by end June 2011.
Sixty six percent of FBR''s revenue comes from manufacturing sector and Large Scale Manufacturing experienced negative 2.3 percent growth in first five months (July-Nov) 2011, sceptics, therefore, consider the revised revenue collection estimates of Rs 1550 billion as unlikely. The external account was in surplus in the first six months of the current fiscal year and foreign currency reserves touched the historic $17.3 billion level but the increased energy and commodities prices especially palm oil could pose another threat to Pakistan''s economy in near future.