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IMF proposes new structural changes in financial sector.

IMF Proposes New Structural Changes in Financial Sector

The International Monetary Fund (IMF) has proposed to the Pakistan Government what it calls "Emergency Adjustment Operation" in the financial sector with immediate effect. Among other things, Pakistan has been asked to take measures in the pricing policy in addition to the increase of petroleum products prices by 41.71 per cent in November last. It includes the increase in the natural gas prices, electricity tariffs and railway fares. The gas prices should be at least in line with Extended Structural Adjustment Facility (ESAF) covenants. The electricity tariff should meet the 41 per cent self-financing target for investment programme.

The other sectors which have been touched by the IMF are: public sector resource management, trade policy and financial sector. The Government has been asked to eliminate exemptions in General Sales Tax except for basic food items. Besides, it has been suggested to eliminate exemptions in the Income Tax. For the development budget: it has been suggested to delete low-priority programmes (People's Work Programme, Teacher/Vocational Training, Unemployment Youth Programme and lump-sum allocation of health division programme), apply savings to Development Programme and assure maintaining its level in real terms.

It has also been proposed to introduce monitoring system on a quarterly basis for the implementation of the Development Budget: and Contain budget deficit to no more than 5.5 per cent of GDP. The suggestions in trade policy include lower maximum tariff to 95 per cent immediately and to 80 per cent by July 1, 1991: reduce tariff exemptions; eliminate restricted list: limit negative list to items restricted for religious and national security reasons; and eliminate import licensing and transform fee into minimum tariff of 7 per cent:

Pakistan Government has also been asked to let Pakistan Steel Mill set its output prices freely; eliminate deletion programme; and also eliminate sanctioning of industrial investment. It has further suggested to implement full auction system for treasury bills; make concessional interest rates positive in real terms; and discontinue new net refinancing from SBP to HBFC.
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Title Annotation:Business Opinion; International Monetary Fund
Publication:Economic Review
Date:Jan 1, 1991
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