KARACHI: The International Monetary Fund (IMF) and Pakistan will soon reach to a bailout deal with a potential size of $12 billion, Fitch Solutions ratings agency said in its latest report.
Pakistan is expected to have an increasing pressure to improve fiscal consolidation through austerity measures, the report said.
“Following the latest meeting of Prime Minister Imran Khan and International Monetary Fund (IMF) Chief Christine Lagarde in Dubai on 10th February 20 19, we at Fitch Solutions maintain our view that an agreement is likely to be reached in the near future,” Fitch Solutions, the primary distributor of ratings agency Fitch Ratings, said in report.
“Early indications suggest that Pakistani authorities requested aid of $12 billion, which is almost twice as large as the previous bailout package of $6.6 billion in 2013.”
The ratings agency said measures to strengthen the country’s fiscal and debt dynamics will likely be a major cornerstone of the IMF deal, with the end goal of narrowing the budget deficit and stabilising the debt-to-GDP ratio through austerity measures.
The IMF plan would be in line with the consolidation programme implemented in 2013 that set out expectations for a reduction in the fiscal deficit by an annualised one percent per year for three years.
“These policies will likely be aimed at reducing the budget deficit from an estimated 6.6 percent in 2018 to approximately 4 to 5 percent, or even lower,” it added.
Fiscal consolidation will help to stabilise, and potentially lower the debt load with public debt currently at 71.4 percent of GDP.
The IMF previously targeted to lower the debt-to-GDP ratio from 63.9 percent in 2013 to 60.5 percent over a period of three years.
The government is expected to strengthen tax administration, broaden the tax base, and raise tax-to-GDP ratio that improved to 11.2 percent in the last fiscal year from nine percent in the FY2013/14.
The government is also expected to have a strong focus on improving anti-money laundering laws and countering financing of terrorism efforts, “given the poor regulations in these areas”.
Fitch Solutions said structural reforms will be another pillar of the IMF deal, similar to the reforms under the extended fund facility arrangement in 2013.
The post IMF likely to extend $12 billion bailout to Pakistan soon: Fitch ratings appeared first on ARYNEWS.
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