The International Monetary Funds (IMF) conducted hectic parleys with the Government of Pakistan and concluded its first round of “tough talks”. The Pakistani leadership will be given access to nine tables that make up the macroeconomic and fiscal framework, according to the IMF, which will clear the way for policy-level discussions to take place the following week.
International Monetary Fund (IMF) concludes first round of talks with Pakistan
Pakistan and IMF are expected to reach a consensus by February 9 and subsequently they will sign a staff level agreement.
Pakistan revises Macroeconomic Framework and shares it with IMF
According to media sources, the Pakistani government has amended its macroeconomic plan and shared it with the IMF. According to this plan, real GDP growth is forecast to drop from 5% to 1.5-2% while inflation will rise from the current fiscal year’s average of 12.5%.
The IMF delegation has noted that even if the Federal Board of Revenue of Pakistan (FBR) meets its projected annual tax collection target of Rs 7,470 billion, nominal growth (real GDP growth rate plus CPI-based inflation) is projected to surpass the 30% threshold, causing the tax to GDP ratio to decline.
An increase in FBR tax collection is anticipated, according to the draught Memorandum of Financial and Economic Policies (MEFP), but the precise amount of new taxation will only be known once nine tables prepared by the IMF mission are received and shared with Pakistani authorities.
Further sources confirmed,
“The IMF’s prescription suggests the hardest choices on taxation and non-taxation fronts in order to fill the yawning fiscal gap. Different proposals are under consideration including jacking up petroleum levy by ₹ 20-30 per litre by maximising the limit from the existing level of ₹ 50 per litre to ₹ 70-80 per litre or slapping 17 per cent GST on POL products or increasing the GST rate by 1 per cent from 17 to 18 per cent through a presidential ordinance,”
IMF has also been adamant on slapping additional taxes on a qualitative, substantial and sustainable basis that should be done in an irreversible manner.
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String of IMF Proposals
Cigarettes
FBR has also come up with proposals to increase Federal Excise Duty (FED) on cigarettes from Rs 6,500 per 1,000 cigarettes. It further indicated that government will increase the FED rate to Rs 0.50 per stick so that the packet rate will go up by Rs 10.
Beverages
There is also a proposal of raising the FED rate on surgery beverages up to 17 per cent from existing rate of 13 percent through the mini budget.
There is intense pressure on diplomatic corps on the FBR. Further, the sugar which is being used in these beverages so the sweetener owners who enjoy political connections irrespective of political divide will also make last ditch efforts to block the proposal at any cost.
Flood Levvy
Also the flood levy of 1 percent to 3 percent , bringing lofty profits earned by banks through the levy and raising rates of withholding rates are also on cards
Civil Servants
In the meantime, the FBR has notified sharing of Declaration of Assets of Civil Servants Rules, 2023 under which information about the assets of civil servants from BS-17 to BS-22 would be shared between FBR and banks.
Statutory Regulatory Order (SRO) 80(I) /2023 issued by FBR , the board shall share a simplified or abridged version of declaration , based on the fields agreed with State Bank of Pakistan , made by a civil servant in his electronic declaration filed with FBR.
Talks with IMF giving tough time to Finance Minister Ishaq Dar and his team
Prime Minister Shehbaz Sharrif described the continuing negotiations as difficult and added that Finance Minister Ishaq Dar and his staff are having a “very difficult time” due to IFF. even implying that drastic action will restart the loan programme if it has stalled.
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