Pakistan out of economic crisis, says IMF's Lagarde

[Devil Soul]

Pakistan out of economic crisis, says IMF's Lagarde
SANAULLAH KHAN — UPDATED 30 minutes ago
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International Monetary Fund Managing Director Christine Lagarde meets Prime Minister Nawaz Sharif at PM House. ─ PM Office
International Monetary Fund (IMF) Managing Director (MD) Christine Lagarde in a meeting with Prime Minister Nawaz Sharif in Islamabad on Monday maintained Pakistan is now "certainly out of economic crisis", a PM Office statement said.

In the first such visit by an IMF head in several years, Lagarde lauded the prime minister on successfully completing the IMF programme and achieving macroeconomic stability during a short period of time.

Lagarde's two-day visit comes around two months after the international lender cleared payment to Pakistan of a final $102 million tranche in a $6.4 billion three-year programme.

"It is a fantastic step in your journey that you have achieved a better and solid economic position in a brief period of two years," she said, as quoted by the statement.

Completion of the IMF programme reflects very positively on Pakistan, she said.

Economic growth up, inflation down
The IMF MD said that economic growth has gradually increased, and the fiscal deficit has reduced while inflation has continuously declined in Pakistan. She also appreciated the country’s strengthened social safety nets and tax policy and administration reforms, according to PM Office.

In an oped penned by Lagarde for The News, the IMF MD focuses on four key priorities for Pakistan, including greater economic resilience, higher growth, quality of growth and belief in the global system.

The IMF officially endorses Pakistan’s economic recovery but has urged the country to continue key structural reforms if it wants to consolidate these gains.

The IMF says Pakistan's economic recovery has gradually strengthened and short-term vulnerabilities have further receded on the back of improved macroeconomic stability and progress on structural reforms.

It, however, maintains that the government should prioritise efforts to complete energy sector reforms.

Read more: IMF confirms gradual economic recovery, urges Pakistan to continue reforms

'Stability through reform'
Appreciating IMF’s assistance for Pakistan’s economic recovery and macroeconomic stability, Prime Minister Nawaz Sharif said that the present government has achieved economic stability by pursuing a comprehensive reforms agenda.

"We are successfully delivering on the major challenges of terrorism, economy and power shortages that we inherited from the previous governments," he said.

"We have dismantled the terrorists’ networks and even presently 200,000 troops are deployed in the northern part of our country to completely eliminate the menace of terrorism from our country. More than 24,000 precious human lives have been lost, about 50,000 wounded while our economy suffered a loss of $100 billion in this war against terrorism," the prime minister said.

 

[Rashid Mahmood]

PIA losses surged to Rs103b during PML-N tenure۔

Pakistan International Airlines (PIA), which posted a Rs2 billion profit way back in 2004, has seen its losses surge to Rs103 billion during the tenure of the current Pakistan Muslim League-Nawaz (PML-N) regime. PAC Chairman Syed Khurshid Shah chaired the meeting on Tuesday convened to discuss the performance of PIA and the Civil Aviation Authority (CAA). PIA’s CFO Nayyar Hayat along with other representatives briefed the members of the committee.

Shah and those present in the meeting expressed their awe when they were told that the national flag carrier has been incurring losses since 2005 which they attributed to bad managerial decisions.

The year-on-year loss figures given to the PAC stated that: in 2005, the losses were Rs4.4 billion that kept increasing over the years. And in 2013 – the first year of the PML-N government – the losses surged to Rs44.71 billion; Rs29.31 billion in 2014, while in 2015, it incurred a loss of Rs29.95 billion.


“Why is it running in losses?” asked Shah, and gave the answer himself, “Because PIA had sold out its routes to other airlines.”

Shah also asked: “Why was PIA lamenting only about the losses and not mentioning the savings of Rs25 billion that it had earned between 2012 and 2016 on account of low oil prices?”

“When I was the minister of religious affairs in 1996, the Hajj fare was Rs14,000 while it was Rs34,000 in 2012 when oil was about $84 per barrel. However, currently Rs56,000 were being charged from each pilgrim when oil prices were less than $50 per barrel.”

“Audit officials should sit with the PIA management and sort out a solution to the issue,” he suggested.

Responding to a question of MNA Sardar Ashiq Hussain Gopang, CFO Hayat stated that PIA had a fleet of 46 aircraft in 2005 – the first year of its losses after making a profit. That number came down to 27, he said, adding today the airline has 39 aircraft.

In addition, PIA also operates five ATRs but they are unsuitable for flights to high altitude areas like Gilgit and Skardu, the PAC was told. Shah responded that those aircraft were also turning out to be a financial as well as a technical loss to the airline. A PIA official stated that since 2014 those aircraft have incurred a loss of Rs2.25 billion to PIA.

CAA Secretary Sqn Ldr (retd) Muhammad Irfan Elahi told the PAC that a new airline – Serene Air – has been granted a licence to begin operations along domestic routes by the end of 2016.

MQM MNA Rashid Godil suggested that PIA should discard the practice of serving meal on domestic routes and instead offer discount to its customers.

To this, the PIA CFO replied that the airline was starting a joint venture with some private firm(s) for catering services because it was costing Rs2.5 billion per year which was 2.75% of the PIA’s sales.
Shah stated that the finance ministry should be asked to pay interest of PIA which is Rs40 billion annually, adding “I will also meet the prime minister in this regard”.

Earlier, the committee took exception to the absence of PIA’s Chairman Muhammad Azam Saigol, who reportedly excused himself from the meeting, saying he had to appear in the LHC in another case.
The committee, however, said that it would probe the claim to know whether the chairman had willingly skipped the meeting or he had some genuine reasons.

Published in The Express Tribune, October 26th, 2016.

 

[Bouncer]

Pakistan out of economic crisis, says IMF's Lagarde
SANAULLAH KHAN — UPDATED 30 minutes ago
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Lies, damn lies. This IMF lady is PMLN's ticket holder.

 

[RuheTag]

The benefit from low oil prices and higher tax returns from it should have been better than this. Country still lurking from GDP under 5%.

 

[NHUDA]

here you go the REAL Analysis ...

Point to Point and shows how much more needs to be done .... forget worst action .. any inaction can lead us into an economic crises and another IMF Bailout ..

http://www.dawn.com/news/1232800/what-has-the-imf-programme-achieved

IN a recent conference call with journalists, the Fund’s mission chief for Pakistan was asked what the ongoing programme has achieved now that we are entering its final few months. His reply focused on three areas. He said government borrowing from the State Bank has been brought down to nearly zero, and given how inflationary this borrowing tends to be, this is a big positive.

He also pointed to the elimination of many SROs, which the accompanying special report says have brought down the cost of tax expenditures (the amount of revenue foregone as a result of giving special exemptions to specific parties) by 0.9pc of GDP, a considerable amount. The power to grant special exemptions has also been limited to a few exceptional cases only, and will require ECC approval, making the decision a little less discretionary. Nevertheless the Fund’s staff see “further need for rationalising overgenerous tax expenditures, which pose a considerable threat to the integrity of the tax system”, meaning much of the job remains to be done.

In addition, the mission chief pointed out that coverage under the Benazir Income Support Programme (BISP) has increased to 5.14 million beneficiaries by the end of 2015, an appreciable increase. The BISP is a good programme and has undergone various levels of scrutiny after being vilified as a patronage machine in the year that it was introduced. An increase in its coverage is undoubtedly a positive development.

Next to the commitments that were made, the deliverables pointed to by the mission chief appear downright puny.
But despite these positives, one cannot help but feel disappointed by the answer. Consider some of the objectives spelled out in the earlier reviews of the facility. Measures were promised that would “lower the deficit to around 3.5pc of GDP” in the last fiscal year of the programme, and “place the debt-to-GDP ratio on a firmly declining path”. The debt-to-GDP ratio is not on a “firmly declining path”, and whether or not the fiscal deficit will come in around 3.5pc of GDP remains to be seen.

The biggest failures appear to have been in the area of public-sector enterprises. Consider this commitment on PIA, given in the December 2013 Letter of Intent by the government to the Fund: “We will hire financial advisers by end-March 2014 to seek potential strategic private-sector participation in the company. We plan to privatise 26pc of PIA’s shares to strategic investors by end-December 2014.”

And consider also this commitment regarding Pakistan Steel Mill: “We have appointed a professional board and will hire financial advisers by end-March 2014 to prepare a comprehensive restructuring plan and seek for (sic) potential strategic private-sector participation in the company.”

Needless to say, neither of these happened. Today, at the start of 2016, PIA is no closer to having a strategic private-sector partner than it was three years ago, and they’re talking about dumping the steel mill on the Sindh government instead. What sort of a track record does the Sindh government have in running large commercial enterprises? Meanwhile accumulated losses at PIA have risen to almost Rs300 billion.

The story is similar in the power sector. The Fund finds that the power sector is still accumulating arrears that progress towards implementing a multiyear tariff as preparation for private investment is still lacking.

In the power sector, the December 2013 commitment made by the government included a list of measures to improve monitoring of power plants, rehabilitation, and increase private-sector investment in power generation. At the end of the paragraph, they included this specific target: “The expansions are expected to generate additional 2000 MW by 2016.”

Yet, almost exactly a year later, a number of private power producers threatened to invoke their sovereign guarantees to ensure recovery of outstanding amounts owed to them by the government as liquidity constraints continued to bite. In the year 2015, oil prices dropped precipitously, opening a window of opportunity to tackle the financial constraints that were hampering power generation ever since the price of oil spiralled in the middle of the 2000s.

Yet “power supply did not show any major improvement through most of the fiscal year” said the State Bank in its latest annual report in 2015. The financial constraints to power generation don’t seem to have been alleviated in line with the commitments made back in December of 2013.

The circular debt made a comeback, rising to Rs648bn by June 2015, after the government had started its tenure with a one-time payoff totalling Rs582bn in June of 2013. Out of this, Rs313bn was fresh accumulation, according to the State Bank. To offset this, the government resorted to imposing three different surcharges on power tariff totalling almost Rs2 per unit. The maximum tariff for electricity for domestic consumers is Rs17, so these surcharges represent an 11pc increase for consumers, brought about through a classic firefighting mechanism that requires no consensus-building exercise, like an open hearing or a debate in parliament.

One could go on and on, giving example after example. The government made strategic commitments at the start of the programme. They promised to take steps to ensure the circular debt does not return, that public-sector enterprises stop being a burden on government expenditures, that the tax base would be broadened to increase revenues without burdening existing taxpayers, that the State Bank’s autonomy would be enhanced to meet international standards, that an energy act would be passed to strengthen the power sector and so on.

Yet all we have today is an increase in the GDP growth rate of less than 1pc, and high level of reserves. Next to the commitments that were made, the deliverables pointed to by the mission chief appear downright puny. The Fund still has a few months to demonstrate its effectiveness as a catalyst for domestic reform, but the sad part of the equation is that the Fund cannot want reform more than the authorities do.