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Pakistan's Budget To Be Reviewed By IMF

by Mary Swire,, Hong Kong

23 August 2010

As the disastrous economic effects of the floods in Pakistan become apparent, Masood Ahmed, Director of the Middle East and Central Asia Department of the International Monetary Fund (IMF), has issued a statement confirming he is fully aware of the budgetary challenges the country will face for some time in the future.

His statement, on August 21, said: “The floods which have hit Pakistan in recent weeks and brought suffering to millions of people will also pose a massive economic challenge to the people and government of Pakistan. The scale of the tragedy means that the country’s budget and macroeconomic prospects, which are being supported by an IMF financed program, will also need to be reviewed.”

“In this context,” he said, “we look forward to meeting with Pakistani government officials in Washington next week to evaluate the macroeconomic impact of the floods, assess the measures they are taking to address this impact, and discuss ways in which the IMF can assist Pakistan at this difficult juncture.”

As part of its previous agreement concerning the stand-by financing received from the IMF, Pakistan had operated under fiscal deficit targets and a commitment to broaden the country’s tax base, particularly by introducing a value-added tax. Neither of those conditions had been fulfilled before the monsoon floods, but they are unlikely to be insisted on now as the IMF, and the World Bank, look to provide further funds to help Pakistan.

TAGS: Pakistan | tax | economics | value added tax (VAT) | fiscal policy | budget | International Monetary Fund (IMF)

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