The International Monetary Fund (IMF) has concluded its first round of “tough talks” with Pakistan, saying the Fund will share nine tables – comprising a macroeconomic and fiscal framework – with Pakistani authorities, paving the way for conducting policy-level talks next week, Geo News reported.
If Pakistan and the IMF reach a consensus before February 9, they will sign a staff-level agreement.
The authorities have significantly revised and shared the macroeconomic framework with the IMF, according to which real GDP growth is expected to fall from 5 percent to 1.5 percent to 2 percent, while inflation will rise from an average of 12.5 percent to 29 percent in the current fiscal year, Geo News reported.
The visiting IMF team has pointed out that nominal growth (real GDP growth plus CPI-based inflation) is expected to cross the 30 percent mark, so that the tax-to-GDP ratio of the Federal Board of Revenue of Pakistan (FBR) is bound to decline even if it reaches its target annual tax collection target of Rs 7.470 billion, Geo News reported.
An increase in the FBR’s tax collection target is looming, but the exact level of additional tax will be determined upon receipt of the nine tables prepared by the IMF mission, which will be shared with Pakistani authorities on Monday in the framework of the draft Memorandum of Financial and Economic Policy (MEFP).
“The IMF prescription suggests the toughest choices on tax and non-tax fronts to close the gaping fiscal gap. Various proposals are being considered, including raising the petroleum levy by Rs 20-30 per liter by maximizing the limit of the existing level of Rs 50 per liter to Rs 70-80 per liter or 17 per cent GST on POL products or increase GST rate by 1 per cent from 17 to 18 per cent via presidential regulation,” sources confirmed while speaking to The News International.
On the other hand, the IMF has asked for additional taxes to be imposed on a qualitative, substantial and sustainable basis which should be done in an irreversible manner.
The FBR has prepared proposals to increase the Federal Accise Duty (FED) on cigarettes from Rs 6,500 per 1,000 cigarettes. It indicates that the government will raise the FED rate to Rs 0.50 per stick so that the package rate will increase by Rs10, Geo News reported.
There is another proposal to raise the FED rate on sugary drinks to 17 percent from the existing rate of 13 percent through the mini budget.
However, the FBR has faced tremendous pressure from the diplomatic corps in this regard. Another aspect is that sugar is used in these drinks, so the owners of sweeteners who have political connections, regardless of political divisions, will also go to great lengths to block this proposal at any stage, Geo News reported.
Measures such as the 1 percent to 3 percent flood levy, which allows banks to make hefty profits through the levy, and raising withholding rates are also on the cards.
Meanwhile, the FBR has announced Sharing of Declaration of Assets of Civil Servants Rules, 2023 under which information about the assets of civil servants of ranks BS-17 to BS-22 would be shared between the FBR and the banks, Geo News reported.
As per Statutory Regulatory Order (SRO) 80(I)/2023 issued by the FBR, the board will share a simplified or abbreviated version of the statement based on the fields agreed with the State Bank of Pakistan prepared by an official in filed his electronic declaration with FBR, the local media reported.
The ongoing negotiations between the two sides, which began on January 31, have been called “difficult” by Prime Minister Shehbaz Sharif.
Shehbaz Sharif said at a meeting in Peshawar on Friday that the IMF is making it “difficult” for Finance Minister Ishaq Dar and his team, alluding to tough measures to be taken to revive the stalled loan program.
(Except for the headline, this story has not been edited by NewsMadura staff and is being published from a syndicated feed.)
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