ISLAMABAD: International Monetary Fund (IMF) country representative Esther Peres has described the talks with the Pakistani government on the ninth review as fruitful.
Peres said, “The discussions included a review of the post-flood macroeconomic outlook as well as an in-depth review of the fiscal, monetary, exchange rate, and energy policies adopted since the completion of the Seventh and Eighth Joint Reviews.” Made it possible.”
The IMF Pakistan chief said the international lender looks forward to continuing discussions on policies that adequately address humanitarian and recovery needs from the floods while preserving fiscal and external stability with available financing. keep
On the other hand, a senior Pakistani government official told JEE News that talks with the IMF are progressing positively and the two sides will soon be able to reach a staff-level agreement.
Pakistan wants to increase the budget deficit.
On the other hand, sources told the publication that Pakistan has requested the lender to allow an adjustment of Rs 320 billion in the budget deficit for the current fiscal year 2022-23 as the said amount was spent on flood prevention and relief.
To boost its tax collection target, the government is considering introducing a flood levy in the current financial year and various proposals are under consideration to finalize its exact mechanism.
Although the political leadership has agreed in principle to take additional tax measures, they want to adopt them in such a way that there is no additional burden on the common man during a period of high inflation and low growth.
“We are looking at imposing a flood levy on those in high-income areas who have been making huge profits in recent years. We haven’t finalized the mechanism yet, but at the moment it is within the top government officials. is being actively considered,” a government official confirmed to JEE News.
The government informed the IMF of flood expenditure including BISP and relief and rehabilitation expenditure during the current financial year including Public Sector Development Program (PSDP) and Annual Development Plans (ADPs) of provincial governments. Is. The adjuster will now be used to increase the budget deficit target which was estimated at 4.9 per cent of GDP at the time of Budget 2022-23.
Differences persist.
Pakistan and the international lender have continued the ongoing talks on the ground, but differences remain over tax collection targets, and non-starter energy reforms, including gas tariff hikes, revolving credit increases, and spending hikes, which Consensus on a staff-level agreement was made more difficult. Completion of the 9th review under the $7 billion Expanded Fund Facility (EFF).
The IMF had asked Pakistan to increase gas rates as the government had maintained prices that had resulted in an increase in the revolving credit of the gas sector.
Despite the government making plans to improve the gas sector, no progress has been seen in the power sector. The revolving credit monster in the power sector has reached Rs 2.4 trillion and has not met all the targets agreed with the IMF to reduce it on a monthly and quarterly basis. Subsidy on tube wells alone will increase the accumulated circular debt by Rs 200 billion in the current financial year.
The IMF also raised objections to the Kisan package as well as the government’s decision to cut electricity and gas rates for five export sectors and the agriculture sector.
The decision on deferred payment of electricity bills remains another bone of contention between the finance ministry and the power ministry if the move was for subsidy.
The Finance Ministry argues that the payment was delayed with the understanding that the payment would be received during the winter. But the two ministries differ on the interpretation.
The IMF has also estimated that the FBR will not be able to achieve the annual tax collection target of Rs 7.47 trillion, so it called for a revised projection in the context of import compression and a slowing economy.
The fund staff also questioned when the nominal growth jumps in the range of 25% to 27% and why it is not reflected in the FBR’s collection. The IMF has estimated that even if the FBR achieves the annual target of Rs 7.47 trillion, the tax-to-GDP ratio will decline in the current fiscal year.
But the FBR argued to the IMF that its recovery is on track and it will be able to achieve the desired target.
However, the litigation may result in a delay in revenue collection which could cover Rs 250 billion in stranded revenue in the coming months as currently, the courts have issued injunctions.
The FBR has sent written requests to the Chief Justice of Pakistan to expeditiously dispose of the cases pending in the courts, which involved scams worth billions of rupees.
