The International Monetary Fund’s (IMF) response to four questions put forth by Business Recorder after a delay of 17 days created more confusion rather than giving any clarity.
These questions were sent on July 18, 2016, a reminder sent a week later and cc’ed to departmental heads, to which the following response was received on 2 August: “Thank you for your queries.
The mission is in discussions with the authorities. We will get back to you regarding your questions at the end of the mission, as we usually have done throughout the past years whether in writing or in conference calls. Again, thank you for your interest in the IMF’s work”.
The Fund responded to the four questions put forth by the Business Recorder on August 4 which is unusual as normally the Fund relevant staff responses within few days. Questions raised by Business Recorder and the IMF response are as follows.
BR: Why did the IMF eleventh review under the $6.4 billion EFF for Pakistan upgrade the growth rate from 4.5 percent to 4.7 percent when the basis for that growth of 4.5 percent under the tenth review was premised on an investment growth of 8 percent and of exports 2 percent given that actual investment growth was 5 percent and exports grew by a negative 9 percent?
IMF: “Growth rate of 4.7 percent is consistent with the estimate by the Pakistan Bureau of Statistics and reflects a variety of factors.
Specifically, despite a weak cotton harvest and continued slowdown in exports, overall robust growth of the economy is explained by a buoyant construction activity, strengthened private sector credit growth, and healthy expansion of the service sector.
Pakistan has benefited from improvements in the security situation and the lagged effects of the pronounced fall in oil prices, and strengthening domestic demand is also indicated by rising machinery imports.”
BR: What is the basis for the Fund staff’s acceptance of government data when independent economists, through use of available and credible primary data (including industry data), have come up with much lower projections of growth?
IMF: “The IMF operates on the basis of official statistics. We understand that the Pakistan Bureau of Statistics (PBS) has been consistent in using the same data sources and the same internationally accepted methodology as in the past.
Naturally, different approaches might yield different estimates, and technical issues are best discussed with the PBS.”
BR: Why did the 11th review not take into account or mention the discrepancy between allocations/actual disbursements under federal and provincial Public Sector Development Programmes (PSDPs) as submitted to the Fund, a prior condition, with the data released in the actual budget on 3 June 2016?
IMF: “The numbers assumed in our framework reflected a projection of PSDP implementation based on our discussions with the authorities, and taking into account past experience with PSDP implementation, within an overall framework of gradual fiscal consolidation in support of strengthening Pakistan’s economic resilience.”
BR: The rise in stocks of energy sector arrears is higher than the decline in the flow of arrears in the energy sector as per the table on page 69 of the uploaded documents on Pakistan on the IMF website. – flows declined by 12 billion rupees between 2014-15 and 2015-16 while stocks rose by 36.4 billion rupees during the two years. How do these figures explain the view that stocks have remained stable while flows are declining?
IMF: “The stock and flow numbers in the table are consistent. The relevant line for the flows is “Total flow” at the bottom of the table.”
Preceding the IMF response to the questions was the following statement: “Today the mission ended its 12th and final review of Pakistan’s IMF-supported program.
The mission chief held a press conference in Dubai and we will shortly issue a press release in Urdu and English. As always, we will communicate further after the Board meeting.
As promised, please find below the responses to your questions. Kindly quote Harald Finger, the mission chief.” -Business Recorder