ISLAMABAD: The International Monetary Fund (IMF) has urged the Pakistani authorities to take adequate and sustainable tax and non-tax revenue measures to generate additional revenues to fill the projected gap of Rs 600 billion in the fiscal framework. What is informed for?
An IMF team – led by mission chief Nathan Porter – is currently negotiating the ninth review in Pakistan, which will last until February 9.
After months of hesitation, the country’s dwindling foreign exchange reserves and worsening economic situation forced the government to accept all the terms set by the Washington-based lender.
A staff-level agreement is expected after the conclusion of negotiations under the $6.5 billion Extended Fund Facility (EFF).
Pakistan-IMF
On Thursday, a visiting IMF delegation asked the government to jack up the Federal Board of Revenue’s (FBR) tax collection target to align it with expected nominal growth in the current fiscal year. possible, especially with the help of CPI-based inflation. Pressure
The fund looks set to accommodate flood costs once the financial framework is finalized. But this will depend on how much flood spending can be done on both the development and non-development side of the budget, particularly through the distribution of stipends through the Benazir Income Support Program (BISP).
First, the IMF and the Pakistani side have to reconcile the fiscal gap figures. Once this is decided, it will pave the way for finalization of tax and non-tax revenue measures through the upcoming mini-budget.
PDL or GST
Top FBR officials told the IMF team that they are considering meeting the annual tax collection target of Rs 7,470 billion, taking into account the recent depreciation of the rupee against the dollar and the possibility of lifting restrictions on imports. will be successful. The possibility of resuming the IMF program.
The IMF has been asking officials to raise the FBR’s annual tax collection target to align it with rising nominal growth as CPI-based inflation reached 27.6 percent. While real GDP growth may be around 2 percent, this should translate into nominal growth. Increase in revenue collection target
Now the government has to make up its mind whether to increase the PDL limit from Rs 50 per liter to Rs 70 or Rs 80 per liter or impose 17% GST on POL products.
One argument is that if the government slaps GST, it will become part of the Federal Divisible Pool (FDP) under the NFC award. So the best option is to jack up the PDL through a Presidential Ordinance while the IMF favors a 17% GST on POL products on the lines of a consumption tax to discourage disincentives.
Again the government is exploring its options to use the data collected in the BISP survey to provide targeted petrol subsidy to motorcycle owners.
Forex deposits
Worryingly, as of January 27, the foreign exchange reserves held by the State Bank of Pakistan (SBP) stood at just $3.08 billion.
The country faces a double-edged sword, as dollar inflows in the form of multilateral and bilateral loans have been severely choked and shrunk.
The latest official data from the Economic Affairs Division (EAD) shows that the country borrowed only $5.59 billion during the first half of the current fiscal year (July-December) against the overall estimate of $22.6 billion. could do
Pakistan received a total disbursement of loans and grants of $9.13 billion in the same period of 6 months during the last financial year 2021-22.
This indicated that there had been a large reduction in the collection of payments from the international creditors, which in turn led the country to default.
