IMF chief says deal with Pakistan on review likely this week

International Monetary Fund (IMF) Managing Director Kristalina Georgieva was hopeful of reaching a deal with Pakistan soon on the first review of the $3 billion stand-by arrangement.

"I expect an agreement of the review to come within this week. So any day now," said the global lender's chief told Bloomberg on Wednesday while assuring the anchor that a deal was very “close”. Her comment comes as an IMF mission is in Pakistan holding policy-level talks with Islamabad.

"The Pakistani authorities and the Finance Minister [Dr Shamshad Akhtar] deserve credit for, in a very difficult time, sticking to the programme that they had," said the IMF chief.

She continued to say that the major issue in Pakistan was tax collection. "The country today collects 12% tax to GDP. We are saying [that] it has to be at least 15% to have the revenues, to sustain the functioning of your economy."

"So, please, for the people in Pakistan that can pay taxes, collect it from them," she added.

40% windfall tax on banks

Meanwhile, officials privy to the ongoing talks between Pakistan and the IMF mission told Geo News, on the condition of anonymity, that Islamabad has agreed to impose a 40% windfall tax on the profits of the banking sector under the global lender's conditions in a bid to secure the second tranche for the staff-level agreement under the $3 billion loan programme.

The IMF mission — led by Nathan Porter — and the Pakistani economic team have also completed discussions on all sectors, added the sources.

The Pakistani delegation was led by Caretaker Finance Minister Shamshad Akhtar and comprised State Bank of Pakistan (SBP) Governor Jameel Ahmad, Federal Board of Revenue (FBR) Chairman Malik Amjed Zubair Tiwan, and officials from the finance and energy ministries.

The sources further said that windfall taxes of up to Rs55 billion will be levied for the financial years 2021 and 2022. The taxes on the profits earned by the banks will be collected in the month of December.

According to sources within the finance ministry, the Finance Bill does not require any amendments for the imposition of windfall tax on the banking sector.

"However, approval from the federal cabinet will have to be sought for the windfall tax," added the sources.

Moreover, the IMF delegation and the economic team are likely to prepare the Memorandum of Economic and Financial Policies (MEFP) draft today, said the sources.

The parties have also agreed to not increase the interest rate further, added the sources.