Demands raised by IMF from Pakistan are to reduce import tariff, ensure harmonization of General Sales Tax, enter into free trade agreements as well as taking ownership of underfunded SDGs (Sustainable Development Goals). A visiting staff mission of IMF met the standing committees on finance of both the houses (National Assembly and Senate). The mission briefed the parliamentarians about the trade growth of Pakistan, GST harmonization and SDGs financing. Sources say that cost of SDGs has been set by IMF team at Rs. 6.196 trillion until 2020. They have also demanded creation of additional fiscal space.
“There is nothing under consideration like Mini Budget”, say the Govt’s officials
These matters came amid the reports of media about completion of second review of the $6 billion bailout programme by Pakistan authorities and IMF mission. Both sides have agreed at not bringing a mini budget or increasing taxes during the current fiscal year albeit a huge revenue shortfall. However the talks are supposed to continue, says finance ministry.
Sources say that IMF mission is concerned over FBR performance and the revenue reforms of government. They showed dissatisfaction as broadening the tax base being the key target of the fund facility has not shown any significant performance. Also the resistance shown by wholesalers and retailers on documentation of economy is alarming.
While approached for comments, Finance Secretary Naveed Kamran Baloch said, “I am busy, can’t talk”. Teresa Daban Sahchez – IMF’s resident representative also did not respond to request by reporters for any comments. Finance ministry’s spokesperson & special secretary Omar Hameed Khan said the discussions have not been concluded yet and would be continuing for a couple of days.
IMF is not happy with the Government’s stance to carry on same prices of electricity for one and half year
Some reports say that both sides agreed on not revising the revenue target any further although the members of FBR have expressed that it is hard for them to cross Rs. 4.8 trillion while the target is Rs. 5.55 trillion this year. However the governments has affirmed its commitment for giving its maximum to get as much as possible closed to the revised revenue target of Rs. 5.238 billion. Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh reinforced the same in the National Assembly by disclosing that non tax revenues collection will help in exceeding the targeted revenue. These are expected to reach Rs, 1.5 trillion while the previous estimate has been Rs. 1.1 trillion.
Sources say that IMF mission has not willingly accepted the government’s decision about freezing the current energy prices for 18 months. Government authorities have recently finalized a 3 years plan of reducing circular debt by consulting the lending agencies including IMF, ADB and World Bank. Before concluding the ongoing discussions the authorities are bound to convince the lenders.
Dr Aisha Ghous Pasha PML-N MNA said to reporters that the parliamentarians gave their opinion to IMF mission that their views about the SDGs and trade improvement are authentic yet impossible. This situation would prevail since the country is under the obligations of Extended Fund Facility of the IMF for next 3 years.
She added that both sides discussed the economy situation with respect to inflation and stagflation, increasing joblessness as well as the contracting economy. However the IMF team did not make any firm commitments.
PPP Senator Farooq H. Naek, chairman of the Senate committee on finance, denied any discussion on mini budget in the meeting. He added that IMF wanted the government to take ownership of SDGs and working towards the deliverables.
He said that the fund has notified that import tariff of Pakistan is too high. IMF has shown its demand to rationalize the same and has also recommended that exporters should be given incentives for increasing exports. IMF at the same time has encouraged Pakistan for entering into FTAs (free trade agreements) with more and more countries so that exports may be increased. Mr Naek said that Parliamentarians have expressed their concerns regarding the rising inflation since the authorities have constantly increasing the power and gas rates due to which more people are being forced to enter in the poverty tab. However they could get no answer.
Few members also questioned the bias prevailing against the local industry as per the terms of trade under the IMF programme. The said terms that ‘0’% taxes on imported raw materials compared to 17% GST being charged on local products.
Sherry Rehman said that the major problem has been the wrong utilization of SDGs funds rather than under-funding. She showed annoyance on the attitude of government since it is not ready to talk to the opposition on national issues. A good common strategy could be prepared to face the challenges and a united stance could be shown to IMF prescription rather than discussing mini budgets.
NA committee chairman Faizullah claimed that no ‘mini-budget’ was in the offing and next year budget will include the reforms or tax proposals required. Trusted sources say that the mission expressed unease about the future of macroeconomic targets and has suggested withdrawing tax exemptions.