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December 25, 2018

Pakistan to implement ‘prior actions’ for talks with IMF

December 25, 2018

ISLAMABAD: Pakistan will have to implement remaining ‘prior actions’ including taking additional taxation measures for jacking up FBR’s annual tax collection target close to Rs4455 billion in order to resume halved parleys with the IMF in second week of next month, The News has learnt.

Differences between the IMF and Pakistan still persist over exact range of competitive exchange rate in terms of pace of adjustments but Pakistani side denied that no range of devaluation fixed during their parleys with the fund staff.

The remaining prior actions are mainly comprised of taking fiscal measures in terms of tabling fresh mini budget into the Parliament for proposing additional taxation measures, placing a comprehensive plan to erase monster of circular debt with adjustments and moving towards placing more competitive exchange rate for making adjustments on account of twin deficits such as curtailing the yawning budget deficit and current account deficit.

These steps can only pave the way for resuming the next round of talks between Pakistan and the IMF probably from second week of January 2019.

Informed sources told The News that the recent massive adjustments in exchange rate and hiking discount rate by 150 basis points clearly indicated that the government already implemented some agreed prior actions while remaining prior actions would be taken in next two to three weeks period for resumption of talks between the two sides. The Ministry of Finance and the FBR have been finalizing taxation measures in the range of Rs150 to Rs170 billion through upcoming fresh finance bill as the tax target might be increased from Rs4398 billion to Rs4455 billion for the current fiscal year.

The sources within the FBR argued that the recent changes in the tax machinery resulted into ending infighting and now the newly placed team was devising strategy to maximize the tax collection with the help of additional revenue measures. The FBR has been facing shortfall of more than Rs100 billion in first five months of the current fiscal and it may cross Rs150 billion after end of December 2018.

The FBR sources also said that the actual tax collection was mush short than the claims made in last fiscal year as the FBR took advances of more than Rs500 to 700 billion so tax target was fixed on the basis of wrong projections. The government, the sources said, was also considering to come up with solution for harmonizing collection of sales tax on goods and services by placing national tax collection agency. On expenditure side, there has been no space to reduce current expenditure but the government might further slowdown utilization of funds on development projects under the Public Sector Development Programme (PSDP). The Ministry of Planning is scheduled to hold review meetings from January 21 to 25 in order to rationalize development spending. When contacted to IMF’s Resident Chief in Pakistan Teresa Daban Sanchez on Monday who is currently abroad on holidays and inquired about possibility of resumption of talks, she said that dialogue and discussion with Pakistani authorities continue, however, there will be some slowdown during this week. The IMF is closed because of Christmas celebrations and most of the mission members have flown back to their homes to meet their families.

This scribe contacted to Advisor/Spokesman Ministry of Finance Dr Khaqan Najeeb, he said that Pakistan and the IMF continued to hold productive round of talks and the discussions were held on fiscal consolidation, energy sector and structural reforms. The government, he said, believes that fiscal consolidation will be done through quality revenue measures, administrative strengths and introducing reforms in the FBR. “No target is fixed on exchange rate,” he said and concluded that the buffer was built through jacking up foreign currency reserves.