The road seems clear now for the revival of a billion-dollar IMF bailout package to help put Pakistan’s economy back on the rails.
By Staff Reporter
ISLAMABAD: In a welcome development Tuesday night, Pakistan and the International Monetary Fund (IMF) evolved broad agreement over the next fiscal’s budget, paving the way for the revival of a stalled Fund bailout program, Independent Pakistan can report.
Disagreement over budgetary targets has been a major point of contention between Pakistani authorities and the Fund staff since the budget proposal was tabled in the National Assembly. The two sides have now converged on revising upward the revenue target and further cutting the expenditure to achieve revenue surplus over fiscal year 2022-23.
Federal Minister for Finance Miftah Ismail said Tuesday night Pakistan and the IMF locked the budget details and achieved substantial progress on finalising budgetary targets for 2022-23.
Reached for comment, the IMF Resident Representative for Pakistan, Esther Perez Ruiz said, “Discussions between the IMF staff and the authorities on policies to strengthen macroeconomic stability in the coming year continue, and important progress has been made over the FY23 budget.”
The next step is for the Fund staff to share a draft Memorandum of Financial and Economic Policies (MEFP), which the Minister said would happen soon. Well-placed sources say the IMF is preparing to share the draft MEFP on coming Friday or Monday.
In next few days, the IMF and State Bank of Pakistan (SBP) will work together to thrash out finer details of modalities and monetary targets, including further tightening of the monetary policy, net international reserves, and net domestic assets.
Official sources say the government has fulfilled demands of the IMF and accepted the demand to slap a PKR 1,200 annual income tax on salaried persons earning PKR 50,000 to PKR 100,000 a month. The government was initially opposed to the idea but eventually came round to the IMF position.
The FBR’s revenue target is now set to increase from PKR 7004 billion to PKR 7442 billion for the next fiscal year. The expenditure target is being revised downward to arrive at a revenue surplus of PKR 152 billion.
Simultaneously, the Fund has agreed to the government’s proposal to lower the ceiling for petroleum from PKR 50 per litre to PKR 20 per litre. This will result in the lowering of the petroleum levy target from PKR 750 billion to PKR 550 billion.
Also, the levy will be rolled out in a phased manner, starting at PKR 5 per litre and gradually increasing over time to PKR 30 per litre.
Against this backdrop, the authorities in Pakistan are expected to roll out the requisite monetary tightening over the next couple of days. The SBP will take other steps to align with the IMF requirements.
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