IMF says Pakistan must improve debt management

WASHINGTON: The IMF said on Tuesday that Pakistan needs to improve debt management and broaden its tax base after talks on its $11.3 billion loan program to help Islamabad deal with financial challenges.There was no mention of any new disbursement from the International Monetary Fund’s 2008 standby loan arrangement for Pakistan in the statement, which came after talks between the two sides in Dubai.But the IMF said it “remains committed to the ongoing dialogue with Pakistan and discussions will continue in the weeks ahead and a mission is planned for July 2011.”Since the loan program was initiated in 2008, the IMF has disbursed $7.27 billion, including the last release of $1.13 billion in May 2010.The Fund additionally provided Pakistan with $451 million to help deal with devastating floods last September.But Tuesday’s brief report suggested the Fund remains unsatisfied with Islamabad’s progress in dealing with its chronic fiscal problems and with promised structural reforms.“Economic growth has been negatively affected by the floods and the high price of oil, inflation remains persistently high, and budgetary problems are undermining macroeconomic stability,” it said.It called March’s new taxation measures “an important milestone.”However, it added, “reducing the budget deficit will require higher revenue through tax reform to broaden the tax base, including steps to implement reforms in the general sales tax.”DUBAI: Pakistan will end exemptions to a retail sales tax, an official source involved in talks with the International Monetary Fund said on Tuesday, adding that the discussions in Dubai went smoothly.Officials from Pakistan, which has been under an IMF programme since 2008, began talks with the IMF last week over targets for the fiscal year that starts on July 1. The meetings were moved to Dubai after Osama bin Laden’s death because of security fears.”We plan to remove the existing exemptions,” said the source, who requested anonymity.Those exemptions are mainly on certain foods, including as dairy products. In March, Pakistan removed exemptions on items used in agriculture, such as fertilisers and pesticides.The measures are due to be announced on May 28 when the budget for 2011/12 is unveiled. – Brecorder