The credit goes to Baqir and Shabbar for bringing balance of payment and fiscal revenue as a way.At the time once the programme was signedup, virtually all the seasoned and professional economists and past MoF gurus were saying that programme will be shortlived — however a superior tone has ben set for quarters ahead of time. Now the fiscal primary surplus is said to be around Rs200 billion to Jul-OctFY20, leaving a space of near Rs350 billion primary shortage in Nov-Dec to get End-Dec target — prone to be more fulfilled.
The narrative of floor on NIR seems to be even better. The NIR was 14.7 billion in Aug-19 against the target of 18.5 billion to End-Sep.
The amount is already better than End-Dec target of minus $16.3 billion — together with SBP accumulating reservations, and IMF assertion, that the release of Fund tranche of $450 million to unlock significant funding from bilateral and multilateral partners, will really assist in construction NIR — not a problem is apparently in fulfilling this for second inspection.
All the remaining four targets are somehow connected with above mentioned previously, and when all these are met, others are inclined to be met as well. However, some relaxation on a few others, may help in reviving growth. The idea is to enhance the charge to private business primarily for export refinancing strategy of SBP.
The movements are to boost exports — good for textile business.The IMF tone implies that the Fund has realized that the gravity of growth situation, and based on good performance from the first inspection, a few bounties are given to boost growth.
One other relaxation is likely on having sovereign guarantees for devoting Rs200 billion Sukuk — government was asking for Rs300 billion, nevertheless the Fund agreed on two third of it this will ease the liquidity up of companies in the energy chain.Another much needed relaxation on indicative targets would be to ease the FBR full year revenues target by around Rs200 billion — still the target appears elusive.
The government was eying a package for structure where the idea was no questions asked for real estate development (mainly construction) from income tax viewpoint. However, the Fund may love to wait another quarter, before giving such booster.
At this time, expect some strategy for low cost home where allocation may come through PSDP. This is currently in accordance with ADB and SBP’s own forecast of 11-12 per cent. The reason behind the revision probably is construction of foreign reserves and global depressed commodity prices standpoint. Some in the market are anticipating a rate reduction in Nov-19 based on IMF revised inflation forecast.
Some say that SBP would ideally like real interest rates on expected inflation at 2 3 percentage — regarding this, and greater than expected inflation in Oct-19, chances of rate decrease in Nov are lean.The fact remains that the narrative is really far good, and the pillow created in the first quarter has offered enough buffer to the subsequent two quarters.
The federal government may face a challenge in the fourth quarter. The government does not have the time for you to relax. More is needed to take the economy out of those woods, and to carry on to meet End-June target.