Washington, DC (BBN) – The International Monetary Fund (IMF) has suggested to the Pakistani authorities for taking effective measures to reduce the budget deficit through increasing revenue earrings.
“Continued efforts are needed to reduce the budget deficit to take the pressure off monetary policy and create space for more credit to the private sector,” the IMF said on Tuesday after talks between the two sides in Dubai.
The IMF remains committed to the ongoing dialogue with Pakistan and discussions will continue in the weeks ahead and a mission is planned for July this year for its $11.3 billion loan program.
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.
“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,” the IMF said in its statement.
Pakistan’s economy faces important challenges, the IMF said, adding that 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.
“The quality of expenditure could be improved by increasing the share of spending on health, education, and infrastructure. Continued efforts are needed to reduce the budget deficit to take the pressure off monetary policy and create space for more credit to the private sector,” it added.
Besides, as government debt has increased, debt management needs to be improved, the IMF suggested.
BBN/SSR/AD-18May11-1:57 am (BST)