World Bank gives 48-hour ultimatum to Pakistan

[Razavi]

What the hell is this......
Wat r these stupid politicians n our government doing...!!!
God help us from these people.

 

[Chanakyaa]

Since this is a defence forum,
I wish to ask the knoledgeble pakistani members,

How does GoP afford and manage to Military Budget Hike while getting such warnings from WB which indicates shortage of funds?

 

[Gin ka Pakistan]

Since this is a defence forum,
I wish to ask the knoledgeble pakistani members,

How does GoP afford and manage to Military Budget Hike while getting such warnings from WB which indicates shortage of funds?

Then stop asking Pakistan to open more fronts in north (Do more) as it cost money.

 

[Neither Right Nor Wrong]

Since this is a defence forum,
I wish to ask the knoledgeble pakistani members,

How does GoP afford and manage to Military Budget Hike while getting such warnings from WB which indicates shortage of funds?

Though I m not a Pakistani , I ll still try to answer your question.

Defence budget is some thing which you can not cut down in times of conflict.

I ll try to give an overview of some problems faced in this years budget.

Pakistan's federal budget for fiscal year 2010 -11 will be of approx $20 billion

Budget deficit (money spent over the given budget amount) will be approx $9 billion.

Their are 3 major sources where the budget allocation made are non productive ie investment made by the country wont give any monetary benefits are-

1. Debt financing -paying back country's loan installment for 2010-11 - Approx $ 8.5 billion

2. Defence expenditure - approx $5.3 dollars

3. And to cover losses made by various public sector enterprises eg steel mills , railaways etc for 2010-11 is approx $ 3 billion.

Major sources of non-investment incomes are-

1. Kerry luger bill-$ 1.5 billion

2. Loans borrowed frm various fianacial institutions(WB , IMF , ADB ,FODP) in 2010-11 is approx $4-4.5 billion


Hence we see despite loans and grants from various sources, budget deficit of $ 2-2.5billion (8.5-(4.5 +1.5) needs to be explained.

Hence WB , IMF are giving Pak warning to match this shortfall by-

1. Increasing electricity tariff.

2. Levy VAT

If it does not do the above then either it ll have to approach another financial institution for more loan.
or
will have to defer the payment of the loan installment.

 

[Chanakyaa]

Thanks NRNW.
perfect.

 

[jha]

480hours are not over , yet..?

 

[Marxist]

480hours are not over , yet..?

WB rejects report Pakistan was given ultimatum
WASHINGTON: The next IMF review of an aid package to Pakistan is scheduled in August, World Bank and Pakistan Embassy officials said while rejecting media reports that the bank has put Pakistan on a 48-hour notice.

The reports claimed that the World Bank had given Pakistan 48 hours to hike electricity tariffs by six per cent and announce implementing the Value-Added Tax from July 1.

The failure to do so, will delay a $300 million payment from the poverty reduction support credit, the reports added.

“We are all disturbed, as no such notice has been issued,” said a World Bank official who requested not to be identified. “International financial organisations do not work like a court or a police officer.”

In July 2008, Pakistan negotiated an arrangement with the Asian Development Bank, the World Bank and the International Monetary Fund for receiving assistance under the poverty reduction support credit programme. This required certain prior actions, including the 6-12-6 formula for increasing power tariffs.

Pakistan has already met the first two requirements of increasing the tariffs by six and 12 per cent.

“As soon as the supply situation improves, we will do the rest,” said an official at the Pakistan Embassy in Washington.

Pakistan was required to implement the 6-12-6 formula by April 1 but the arrangement also had a cushion which allowed Islamabad to delay the tariff hike by June 30.

“The VAT will be included in the new budget, so no ultimatum needed,” said the official.

The next IMF review is due in August, and then the review report goes to the board, which gives Pakistan more time to take the required actions.

The World Bank group has been assisting Pakistan in preparations to introduce the VAT law. But the move is strongly resisted by business communities across Pakistan.

DAWN.COM | Business | World Bank gives 48-hour ultimatum to Pakistan

 

[Emperor Palpatine]

“The VAT will be included in the new budget, so no ultimatum needed,” said the official.

ohk..so they implemented VAT without ultimatum....

 

[Awesome]

No way should Pakistan increase the electricity bills or further tax its heavily taxed public. Losing this 300 Mil would do no harm to Pakistan, more money saved from Zardari's clutches.

 

[Neither Right Nor Wrong]

No way should Pakistan increase the electricity bills or further tax its heavily taxed public. Losing this 300 Mil would do no harm to Pakistan, more money saved from Zardari's clutches.

$300 Million aid is hardly consequential in the light of bigger things like Budget deficit.

If these taxes are not levied there are very few options left for pak to address this dedicit.

This years budget deficit is gonna be around 5.5% of GDP.
So either Pak govt earns more revenues.
or
it will have to cut down on it spending.

so big defence budgets will have to go.

Public sector enterprises suffering losses will have to be sold.

and the most feared(by IMF,WB etc) Pak will have to default on it loan payments.

In Pak tax to Gdp ratio is only 10% ..this needs to be addressed.

By levying VAT, % of population coming in the tax net will increase significantly.
I think it a step in the right direction.

 

[jin]

Technigues which can be employed to reduce dependence on foreign aid like, loans written off, taking benefit from liberal policies, trade liberalizaton etc which are not going to happen to benefit from. The only option Pakistan has to privatize SOE's to repay or to use for capital formation, persuade to increase the repayment period while using its current role in a geostrategic scenario and transforming it into a strong say regarding use of aid funds.
Increase of utility prices and VAT will further hamper our already meagre exports, will deter foreign investment due to high cost and will make hurdle in improving our national saving.

 

[AZADPAKISTAN2009]

what genius agreed to these conditions :: to get a loan of 300mil the cost is increas the rare and non existent electricity by 6% plus charge VAT on top which i guess will be aprox 15-17%.

living for avg pakistanis will be inflated roughly upto 20% with more loadshedding ,meaning no electricity at all.

And the funniest part is world bank has provided this money to reduce poverty... WTF!?

300 Million and push the poor people of pakistan down the sweage ... I don't like the idea of Pakistan getting funding from world bank

 

[keeninterest]

Neither Right Nor Wrong, something’s amiss at my end, please help me understand.

Pakistan's federal budget for fiscal year 2010 -11 will be of approx $20 billion

Budget deficit (money spent over the given budget amount) will be approx $9 billion.

pakistan says their tax to gdp ratio is between 8-9%, and throws up a figure of gdp as 175b usd for the fiscal ending june’10. assuming what they are saying is true then the revenue of the GoP from direct/indirect taxes should add up to somewhere between 14-15.75b usd and over this there will be numerous other receipts that add to the exchequer a figure I suppose should be between 2-3b usd, which means GoP’s total revenue generation and non debt funding for the next fiscal should be anywhere between 16-18.75b usd but you are saying it just amounts to 11b usd (20[budgeted figure]-9[debt raised to finance the budget]) then is the GoP lying on the GDP figures or are they lying on the tax to GDP ratio or is a part of the revenue being used to address the immediate pending debt?

Their are 3 major sources where the budget allocation made are non productive ie investment made by the country wont give any monetary benefits are-

1. Debt financing -paying back country's loan installment for 2010-11 - Approx $ 8.5 billion

2. Defence expenditure - approx $5.3 dollars

3. And to cover losses made by various public sector enterprises eg steel mills , railaways etc for 2010-11 is approx $ 3 billion.

the non productive expenditure has been put at 16.8b usd (8.5+5.3+3), then what is the investment being made in productive sector and if Pakistan is not investing enough in the productive sector then how does pakistan plan to come out of the vicious circle of further falling in the trap of debt because quite clearly the tax to gdp does not add up, and what guarantee is that the VAT will generate what is being projected?

does this non-productive expenditure add up to the projected budget figure?

also please share the savings to gdp rate for the current fiscal.

Major sources of non-investment incomes are-

1. Kerry luger bill-$ 1.5 billion

2. Loans borrowed frm various fianacial institutions(WB , IMF , ADB ,FODP) in 2010-11 is approx $4-4.5 billion


Hence we see despite loans and grants from various sources, budget deficit of $ 2-2.5billion (8.5-(4.5 +1.5) needs to be explained.

how is this part of the money being used, especially the loans being raised through various international monetary institutions?

are they using it to stack up the forex reserves to show their credit worthiness, ehnce project themselves as an attractive investment destination and for further repayment of existing debts or is this money being used to finance the budget, and if it is not being used to finance the budget then from where is the 9b usd being raised?

i know there are quite a few questions there, but please do help me understand them, thanks.

 

[Hyde]

banao budget - banao yahan pdf pe baith ke Pakistan ka budget tayyar karo

 

[Neither Right Nor Wrong]

are they using it to stack up the forex reserves to show their credit worthiness, ehnce project themselves as an attractive investment destination and for further repayment of existing debts or is this money being used to finance the budget, and if it is not being used to finance the budget then from where is the 9b usd being raised?

i know there are quite a few questions there, but please do help me understand them, thanks.

I ll start with your third question first

Kerry luger bill - $1.5 billion

This $1.5b is being used

1. for financing of military operations -it partly compensates the money spent by Pak army in its WOT.

2. Paying for services offered by pakistan eg airbases leased by to US , fueling of drones etc

3. Financing various foreign military sales to Pak eg Helicopter,Drones , NVG , Kevlar vest , MLU packeges etc

Civillian aid
4. funding various development projects like thermal reactors being bought by pak.

WB , ADB

Money provided by them is being used for development projects like construction of Dams etc

ADB was being roped in for funding Rental power plants..but an audit done by ADB showed large corruption taking place and refused to participate.

IMF

IMF is to provide $11b to Pak under 23 months standby arrangement.
And as you predicted this money is being used to enhance Pak's credit
worthiness and attract investments.
though interest rate on this money is minimal but starting 2011(when stand by time period gets over ) this money will have to be returned within short span of 4yrs.