Islamabad: The International Monetary Fund (IMF) has been unsatisfied with Pakistan’s joint revenue and expenditure plans and has asked for additional information, including details of shelved development projects that have now been re-listed as the government’s top priority. has been initiated.
According to finance ministry sources, the global lender’s demands come amid frustration in the Pakistani camp over the IMF’s insistence on sharing information for the entire current fiscal year, beyond the July-September 2022 ninth review period.
Sources said that the last meeting between senior officials of Pakistan and the IMF was not very cordial as the latter was asked to comply with measures which were not supposed to happen even during the ninth review period.
The IMF has also questioned Pakistan’s claim that it could raise Rs 800 billion in revenue through the petroleum levy in the current fiscal year against a budget target of Rs 855 billion. Deposits in the first quarter were only Rs 47 billion, which, according to a finance ministry official, crossed Rs 80 billion by the end of October.
But according to sources, the IMF has asked Pakistan to provide monthly details of petroleum levy and consumption of petroleum products from July to June 2023.
Sources said the fund expressed apprehension that the government was exaggerating the recovery estimates. However, Finance Ministry officials believed that collection of petroleum levy and oil consumption would improve as business activities started picking up in the post-flood period.
Pakistan has already imposed a maximum permissible levy of Rs 50 per liter on petrol and has started increasing the levy on diesel as well.
Due to diverging positions, there has been a significant delay in the arrival of the IMF mission to Pakistan for the completion of the 9th review and approval of the $1.2 billion loan tranche. The IMF team was tentatively scheduled.
It was supposed to arrive on October 26, but so far the two sides have not been able to agree on a new date.
The delay in completing the Ninth Review is also affecting the disbursement of loans by other international creditors, putting additional pressure on foreign exchange reserves and exchange rates. The IMF is looking for additional revenues to cover the shortfall in the petroleum levy target of Rs 855 billion. Pakistan has vowed to impose a general sales tax on petroleum products if the collection falls short of the target.
According to sources, to explain the underlying budget deficit, the IMF has asked the government to provide details of expenditure and revenue forecasts for the four provinces. It has also sought details of the expected revenue shortfall and additional expenditure from the provinces, particularly from Sindh and Balochistan, after the floods.
Last week, the government told the IMF that a primary budget of Rs14 billion would still be in surplus, or 0.02 percent of GDP, against a budget of Rs153 billion. However, this estimate is in contrast to a World Bank report that pegged Pakistan’s primary deficit at 3 percent of GDP. Sources said the government had estimated total spending, including provinces, at 15.1 trillion rupees, an increase of 934 billion rupees, which the IMF thought was low.
According to sources, the reason for the dispute was the additional power subsidy of over Rs 100 billion provided to exporters. Pakistan had promised not to provide more subsidies to export sectors after allocating about Rs 20 billion in the budget.
Sources said that according to estimates, the annual cost may increase to 145 billion rupees.
The IMF has also sought details of additional subsidies worth Rs 48 billion which the government recently approved for supplying imported urea at controlled prices and running two urea manufacturing plants on subsidized imported gas.
Moreover, the fund was also not satisfied with the subsidy of Rs 20 billion for the affordable housing project and sought details of eligible persons.
The lender has sought information on Public Sector Development Program (PSDP) projects that the coalition government had previously put on hold, but was now keen to revive after the 2022 floods.
The Ministry of Planning could not process this information due to the ongoing strike by Economist Group and Technical Group against discrimination in granting 150% executive allowance.
Sources said Pakistan has also been asked to provide details of provincial development projects and their allocations as the IMF suspects that provincial spending may compromise the overall core budget surplus target.
Earlier this week, IMF Resident Representative Esther Peres said IMF staff continued to discuss policies with Pakistani officials to prioritize humanitarian and recovery needs and better target support, while macroeconomic and It also accelerated reform efforts to maintain financial stability.
He added that timely finalization of the recovery plan was essential to support dialogue as well as continued financial support from multilateral and bilateral partners.
