On the new SBA, the IMF says it protects the most vulnerable
The seal for the International Monetary Fund is seen in Washington, DC, January 10, 2022. — AFP
ISLAMABAD: Pakistan has informed the International Monetary Fund (IMF) about the under-preparation action plan to enhance the investment efficiency of climate-related projects for the federal cabinet’s approval by year-end.
“Pakistan’s high vulnerability to natural disasters underscores the importance of climate adaptation policies. The (Pak) authorities plan to accelerate critical adaptation measures, including strengthening of flood safety projects and transforming the agri-food system.
“They are also working on an action plan to enhance the investment efficiency of climate-related projects for cabinet approval by year-end. Over the medium term, the National Adaptation Plan, to be developed with the support from UNEP, would also help enhance policy efforts towards resilience of particularly vulnerable and exposed sectors, including agriculture, power, and transport infrastructure,” the IMF said in a statement about the Stand-by Arrangement (SBA) programme under the title frequently asked questions on Pakistan.
With regard to revenue mobilisation, the IMF said, “The FY24 budget advances a primary surplus of around 0.4 per cent of GDP by taking some steps to broaden the tax base and increase tax collection from undertaxed sectors, including construction and agriculture sectors while ensuring space to strengthen support for vulnerable through the BISP programme.
“Going forward, the authorities plan to continue strengthening revenue administration efforts, together with the support from the World Bank, the Asian Development Bank, and the IMF. Work on creating a Compliance Risk Management framework in FY23 will enable improvements in tax compliance in FY24,” added the IMF.
On the new SBA, the IMF says it protects the most vulnerable by further increasing the FY24 Benazir Income Support Programme (BISP) envelope to maintain the generosity of BISP programmes in real terms. “The SBA also increases development spending to enhance infrastructure and climate resilience. Additionally, policy actions to place inflation on a downward path towards the SBP’s target will help protect the purchasing power of the most vulnerable through continued monetary policy tightening and the easing of price pressures caused by the shortage of basic goods following the removal of import restrictions and FX rationing.
“The programme aims to stabilise the economy and address the needs of the Pakistani people by providing an anchor for policies to address domestic and external imbalances, and a framework for financial support from multilateral and bilateral partners. Policy efforts under the SBA-supported programme centre on the careful implementation of the FY24 budget; restoring a market determined exchange rate to absorb external pressures and eliminate FX shortages; and appropriately tight monetary policy aimed at disinflation. Policy actions also include continued reform efforts to improve energy sector viability, strengthen State Owned Enterprises (SOEs) and governance, and build climate resilience. Steadfast policy implementation is critical for Pakistan to address its large financing needs, support the most vulnerable, especially from high inflation,” the IMF concluded.
