An International Monetary Fund (IMF) team will conduct a staff visit to Pakistan on 16 September, so confirmed Teresa Daban Sanchez, Resident Representative of the Fund in Pakistan. This visit may be seen in the context of the IMF programme monitoring arrangements in place which stipulate that "the authorities will transmit promptly to IMF staff any data revisions as well as other information necessary to monitor the arrangement with the IMF."
The consolidated budgetary operation statement released by the Ministry of Finance on 27 August revealed a disturbing disparity between the data shared with the IMF during negotiations (with the staff-level agreement reached on 12 May 2019 - one month and three weeks before the end of the fiscal year), data which was identical to what is contained in budget documents (the budget was announced on 11 June - around three weeks before the end of the fiscal year) and the actual data contained in the consolidated budgetary operation on nearly all critical macroeconomic indicators for 2018-19 that formed the basis of the negotiations with the Fund including: (i) primary deficit of 3.6 percent as opposed to 1.8 percent claimed by the Pakistan authorities in May, a figure that was being challenged by Business Recorder at the time backed by independent economists, which the Fund and Pakistan authorities agreed would be brought down to 0.6 percent of GDP by the end of the current fiscal year. Needless to add, to achieve this target would require harsher conditionalities, harsher from the perspective of the common man; (ii) budget deficit projected at 7.2 percent with the consolidated statement noting 8.9 percent July-June 19 - a disparity of 1.7 percent of GDP; (iii) current expenditure differential of 1.5 trillion rupees; (iv) mark-up payable rose by 400 billion rupees more than projected; and (v) federal and provincial tax collection shortfall was 41 billion rupees. One would assume that the government would argue in its defence that the projections it made earlier specifically with respect to balance of payments and fiscal accounts were not available early May though to assume that the same situation prevailed a month later in June when the budget was announced does stretch credibility or compels one to challenge the capacity of the Ministry of Finance.
The economic managers who signed the memorandum with the IMF had not been in position for long enough and perhaps, were unable to determine the credibility of the projections determined by their staff. However, this reflects rather poorly on the quality and capacity of staff deployed in economic management. The fact of the matter is that the economy's performance during the Khan administration's first year in power was even worse than expected during negotiations with the Fund and as has been the norm as and when harsh economic policy decisions are required to be made based on performance of the economy, the price would have to be paid by the general public.
As per the schedule of reviews, the IMF notes on its website that while approval of the arrangement was on 3 July 2019 the first review and end of September performance/continuous criteria is scheduled for 6 December 2019 and in the event that the country meets its agreed conditions (quantitative time bound benchmarks) 328 million Special Drawing Rights would be disbursed or 16 percent of the country's quota. Thus the staff visit expected soon after Ashura is an extraordinary one due to the wide disparity between the government's projections during negotiations and the actual data released for last year, one may safely speculate.
To conclude, it is patently evident that data mining - due to lack of knowledge/incompetence - would at best have achieved a reprieve of two and a half months with respect to fiscal policy. Monetary policy agreed with the Fund has been under implementation since 16 May 2019 when the market-based exchange rate was adopted, though as per the SBP's website the rupee at present is over-corrected and is now undervalued to the tune of 10 percent, and a discount rate of 13.25 percent is around 5 percent, instead of the usual 2 to 3 percent, higher than the core inflation to which it is normally pegged.