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Sunday June 26, 2022

Important progress made over budget 2022-23: IMF

Discussions on policies to strengthen macroeconomic stability in the coming year continue with Pakistan, says IMF resident chief

By Mehtab Haider & Web Desk
June 22, 2022
International Monetary Fund (IMF) Headquarters in Washington. — AFP
International Monetary Fund (IMF) Headquarters in Washington. — AFP

WASHINGTON: The International Monetary Fund (IMF) on Wednesday confirmed that a breakthrough has been achieved in talks with Pakistan for the revival of the $6 billion loan facility stalled since months due to policy breaches by the previous government.

In a statement, IMF Resident Chief 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 latest development comes a day after Federal Minister for Revenue and Finance Miftah Ismail had indicated the revival of the agreement with IMF within a day or two.

“I am very hopeful that the IMF programme will be revived soon,” the finance minister had said while speaking to journalists.

Following the downward trend of the Pakistani rupee against the US dollar, the breakthrough with the lender is of utmost importance to steer the country out of the ongoing economic crisis.

To meet the conditions of the IMF, the government had to take some tough measures, such as banning the import of certain items and removing subsidies that resulted in an unprecedented hike in POL [petrol, oil, lubricants].

Taxation measures

According to a The News report, the IMF will now share a draft Memorandum of Economic and Financial Policies (MEFP) on coming Friday or Monday.

In the next few days, the IMF and SBP will work out modalities on monetary targets, including further tightening of monetary policy, net international reserves and net domestic assets.

Sources privy to the development said the government has fulfilled the demands of the IMF and accepted to slap Rs1,200 tax on salary earner of Rs50,000 to Rs100,000.

“The government made all-out efforts to convince the IMF but failed to do so. The FBR target has been proposed to be increased from Rs7,004 billion to Rs7,442 billion for the next fiscal. The expenditure target was revised downwards, so the revenue surplus of Rs152 billion would be achieved,” the report said.

The sources said the petroleum levy has also been readjusted as the levy of Rs5 per litre will be imposed. This would be gradually increased up to Rs30 per litre instead of Rs50 per litre. The petroleum levy target has been slashed down from Rs750 billion to Rs550 billion.

The government has also agreed to impose 1% poverty tax on firms earning Rs150 million, 2% on those earning Rs200m, 3% on over Rs250m and 4% on Rs300m above, according to a Daily Dawn report, which was only 2% on those earning Rs300m and above.

"I am also expecting that the duration of the program will be extended by a year and the amount of loan will be augmented," Finance Minister Miftah Ismail told Reuters, adding that the IMF had not committed to it yet, but based on talks he expected it to come through.

The two sides held talks on Tuesday night and agreed on the budget and fiscal measures but still need to agree on a set of monetary targets, said Miftah Ismail.