Pakistan has right to sustain, retire IMF's SBA

The government has the right to sustain or retire the current Stand-By Arrangement (SBA) programme, informed sources revealed to Business Recorder on Friday. According to IMF terms and conditions, it is up to the government of Pakistan to determine whether it will prefer a new loan programme under IMF and cancel the current one, or sustain the current SBA as it has.
Any country can apply for a new IMF loan programme even after suspension of the existing one. There is no hard and fast rule at all, they said. Sources said that next month an IMF team is scheduled to visit Pakistan. "Whether this visit would be a part of the fifth review under SBA programme or it would be a general one, this would be decided during the Spring meetings currently ongoing in Washington DC", sources disclosed. During this visit budgetary figures including revenue measures, fiscal deficit and inflation for the coming fiscal 2011-12 would be discussed between the IMF and the government of Pakistan.
"It is quite possible that the Pakistani authorities may formally request for a new loan programme under IMF during these Spring meetings", sources added. Repayments to the IMF are scheduled to begin in calendar year 2012 and it is quite possible for Pakistan to repay the IMF as per schedule. Pakistan has always made repayments on time in the past, sources disclosed.
Source disclosed that IMF has projected the GDP growth rate of Pakistan to be not more than 2.7. Unless the country has a bumper wheat crop with a production of 26 or 27 million tons, the projected GDP growth rate may not go higher. The stalled IMF programme is centered on the growing fiscal deficit, as stated in the second quarterly report 2010-11 of the State Bank of Pakistan and sources reveal that low tax collections remains a major bone of contention between the IMF and the government.
Low savings because of current tax-to-GDP ratio pose huge vulnerability to the economy, as per the IMF. Pakistan does not have any domestic cushion and every time there is a shock to the economy, the country opts for foreign borrowing either from US or Arab countries. Low taxes mean that the government would not have sufficient resources for investment in social sector required to unlock the potential. "Something needs to be done by the economic managers to increase tax to GDP ratio", sources stated.
Tax collection of some African countries was higher than Pakistan. Even India is comparatively collecting more taxes. The lack of fairness in tax system is one of the major reasons for the prevailing low tax to GDP ratio in Pakistan because some people have been overburdened with taxation whereas others are not even filing tax returns despite possessing considerable assets. There is an urgent need to eliminate the unfairness in the tax system and to develop political consensus on the need to increase the tax to GDP ratio for sustainable development and economic growth. In addition, sources maintained that it is widely believed that a lot of taxes collected/deducted by the withholding agents are not deposited in the national exchequer.
The energy crisis has deepened because a significant number of people are not paying their electricity bills and induction of professional management is critical in the power distribution companies to minimise non-technical line losses and make them efficient.
The IMF statement noted that structural reforms had moved forward in late 2008 and 2009, but have been retarded or reversed in 2010 and 2011. This would be challenging task for the government to achieve the fiscal deficit and inflation targets particularly after the rollback of some of the taxation measures recently taken by Pakistan through the promulgation of the three presidential ordinances.