IMF puts tough conditions for package

ISLAMABAD: Pakistan is negotiating the toughest bailout package with the IMF mission here these days where the Fund is asking Islamabad to take additional taxation measures of Rs175 to Rs200 billion for curtailing the budget deficit within the desired limits of slightly over 5 percent of GDP.

The ongoing talks between Pakistan and the IMF are neither easy nor soft, so Pakistan will have to face tough conditionalities to finalise this bailout package. The IMF has assessed that the FBR was going to face massive revenue shortfall, so the government will have to take additional tax measures to avoid slippages on fiscal fronts.

One of the biggest demands of the IMF is on front of jacking up the GST rate from standard rate of 17 percent to 18 percent as alone this step can fetch over Rs75 billion into the national kitty in one year. As the five months had already passed, so its impact for the remaining period will reduce accordingly. The PTI-led government does not have any other option but to seek the IMF package to stabilise the economy on short to medium term basis but it is yet to see how the PTI is going to respond if the IMF comes up with more tough prescriptions in the days ahead.

The IMF is scheduled to conclude the ongoing parleys till November 20 but there are chances that the Fund mission might increase its stay in Islamabad to finalise modalities of the bailout package.

The IMF has asked Pakistan to explore all options on direct and indirect tax sides for generating the desired revenues for fetching additional Rs175 to Rs200 billion to fill the gap. The option of raising the GST rate by one percent from 17 to 18 percent is also under consideration but the Ministry of Finance and FBR are opposing it on the basis of higher inflationary impact. The option of raising the withholding tax on both filers and non-filers with higher rates for non-filers is actively under consideration and the FBR is estimating the exact revenue impact of different proposals to this effect, said the top official of FBR.

Official sources confided to The News on late Friday night that Pakistan’s negotiating team was quite weak except three officials belonging to each from the Ministry of Finance, State Bank of Pakistan and the Federal Board of Revenue. “We have never witnessed such a weak team negotiating with the IMF,” said one independent economist while talking to The News here on Friday. The IMF, the sources said, was becoming too hard because there was criticism done by many quarters in Pakistan that the Fund team was too lenient in case of the last programme.