The size of the minibudget is emerging as one of the final sticking points between the Ministry of Finance and the IMF field mission, in Pakistan for the 9th review of a billion-dollar bailout program.
By Muhammad Ali & Naveed Naqvi
ISLAMABAD: Pakistani authorities and the International Monetary Fund (IMF) staff are converging on the understanding that the country needs to find new revenue streams to keep its budget targets for the current fiscal year on track, it emerged Tuesday as the two sides sat across the table for the 9th review of a stalled bailout program.
But the parties disagree over how much fresh revenue Pakistan needs to raise, with the Fund staff shooting for PKR 600 billion and Pakistan eyeing PKR 200 billion.
Minister for Finance Senator Ishaq Dar is leading the Pakistani side in the technical-level talks, scheduled to continue till Friday, with the Fund’s field mission headed by Mission Chief Nathan Porter.
At the huddle that began Tuesday morning at Finance Division, the two sides are looking to iron out their differences over the trajectory of Pakistan’s economy as part of the 9th review of the Fund’s generous but tough-love EFF program.
The Pakistani side is miffed that the Fund is not prepared to consider Pakistan’s how beleaguered Pakistan’s economy is after years of mismanagement, a major global pandemic, the fallout of the war in Ukraine, a flooding cataclysm of biblical proportions, and a global slowdown brought on by a sustained period of high inflation and low growth.
The Fund staff can cite an equally long list of issues facing the global economy, arguing for the urgent need for Pakistan to pull itself up by its bootstraps.
The 9th review of the USD 7 billion EFF was originally due in November 2022. It ran into delays after a difference of opinion developed between Finance Minister Ishaq Dar and the IMF staff.
Probably leery of exceeding the public’s threshold of pain.
While Dar thinks the common Pakistani is already panting under a staggering burden of inflation and can shoulder no more, the Fund staff believe unfunded subsidies are out of the question, and the modest primary surplus Pakistan committed to returning at the end of the current fiscal is inviolable.
The USD 7 billion EFF program was signed in 2019 by the administration of former Prime Minister Imran Khan. The numbers for the current fiscal were worked out in June 2022 under Financme Minister Miftah Ismail, the first finance minister of the Pakistan Democratic Movement (PDM) coalition government.
The IMF asks Islamabad to take additional taxation measures to fetch PKR 600 billion in the wake of fiscal gap in overall gap between total revenues and expenditures going to occur in the current fiscal year. The govt is ready to bring mini budget for slapping taxes of PKR 200 billion.
The government is also considering to abolish unfunded subsidies and reducing expenditures of all ministries by 15 percent including Ministry of Defence. It remains to be seen how the two sides proceed on the budget deficit and primary deficit for the current fiscal year.
The IMF is also asking authorities to hike both gas and power tariffs in order to tackle the circular debt.
The meeting discussed and reviewed the economic and fiscal policies and reforms agenda to accomplish the 9th review under the Extended Fund Facility.
Finance Minister Senator Ishaq Dar welcomed the delegation and shared long standing friendly relations with the IMF.
Dar briefed the mission on fiscal and economic reforms and measures being taken by the government in different sectors including bridging the fiscal gap, exchange rate stability and in energy sector for the betterment of the economy.
He outlined the reforms introduced in power sector and a high-level committee appointed to devise modalities to whittle down the gas sector circular debt.
The finance minister voiced his gratitude to the managing director of IMF on continuation of talks and reiterated that the government was committed to complete the present programme.
The IMF mission chief expressed his confidence that the government will meet the IMF requirements for the completion of the 9th review and hoped that Pakistan would continue its progress on the reforms in various sectors and complete the IMF programme within time effectively.
The meeting was also attended by Governor State Bank of Pakistan Jamil Ahmed, Minister of State for Finance and Revenue Dr Aisha Ghous Pasha, IMF resident representative Esther Perez Ruiz, Chairman FBR, SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Mehmood Pasha, Secretary Finance, members of IMF delegation and senior officers from Finance Division.
Copyright © 2021 Independent Pakistan | All rights reserved
