ISLAMABAD: The incumbent government has accelerated implementing ‘tough conditions’ tabled by International Monetary Fund (IMF) to revive $7 billion Extended Fund Facility (EFF) stalled for months.
According to details, the Fund and Pakistan moved closer to the revival of their loan prgramme as Islamabad has agreed to several conditions including increasing energy prices and improve tax collection, as demanded by the IMF.
Sources told that the federal cabinet has approved the revised circular debt management plan through circulation, under which the government will end subsidies and jack up electricity price by Rs7.91 per unit in four quarterly adjustments – Feb-March 2023, March-May, June-August and September-November.
Sources claimed that the federal cabinet also approved the withdrawal of electricity subsidy of Rs65 billion given to the exporters and farmers, with effect from March 2023. The subsidy of Rs12-13 paise per unit on electricity given to export sector will be withdrawn, they added.
Moreover, almost Rs250 billion will be recovered from electricity consumers by June 2023. Under the circular debt management plan, the government would impose a surcharge of Rs3.39 paise per unit.
The government will charge Rs3.21 per unit from now onwards, 69 paise from March-May and increasing again to Rs1.64 per unit from June onwards to August of 2023. From Sep-Nov, the govt will hike power tariff by Rs1.98 per unit.
Sources claimed that the government would recover Rs65 billion by June after withdrawing the subsidy given to farmers. Meanwhile, Rs51 billion would be recovered by withdrawing subsidy for exporters. The government would also recover Rs14 billion after the withdrawal of subsidy under Kissan package, sources added.
‘Pakistan receives MEFP draft’
Earlier on Feb 10, Finance Minister Ishaq Dar said that Pakistan had received the Memorandum of Economic and Financial Policies (MEFP) draft from the International Monetary Fund (IMF).
In a press conference, Dar said: “Pakistan is expected to receive $1.2 billion from IMF after the completion of ninth review of $7bn Extended Fund Facility (EFF).” He further said that Rs170 billion in new taxes would be imposed through a mini-budget.
The minister went on to say that the government and global lender officials would hold a virtual meeting in this regard on Monday.
The finance minister said that Petroleum Development Levy (PDL) on diesel will be hiked to Rs50/litre under the IMF target. “Govt will raise PDL on diesel by Rs5 in March and April respectively to meet IMF target,” he added.
IMF statement
Meanwhile, the International Monetary Fund (IMF) issued an official statement following the conclusion of the 9th review talks on the stalled loan program.
IMF mission chief Nathan Porter, in a statement, said that the timely and decisive implementation of policy measures along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development.
The statement, issued after the mission concluded its 10-day Pakistan visit, welcomed Prime Minister Shehbaz Sharif’s commitment to implement policies that are required to “safeguard macroeconomic stability”. He also thanked the leadsfor the “constructive discussions”.
The IMF chief noted “considerable progress” was made during the talks with Pakistani officials on “policy measures to address domestic and external imbalances”.
The IMF mission chief said that the “virtual discussions” will continue between the two sides in the coming days to finalise the “implementation details” of the policies.
‘Tough conditions’
International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600-800 billion in additional taxes in the second round of talks to revive $7 billion Extended Fund Facility (EFF).
During the meeting, the Fund set tough conditions for additional measures that included imposing roughly Rs600-800 billion in additional taxes.
Sources told ARY News that Pakistan was willing to impose taxes to the tune of Rs200 billion through a ‘mini-budget’, while the Fund pressed Islamabad to foist over Rs600 billion additional taxes.
The lender also demanded the government increase tax collection to 1 percent of Gross Domestic Product (GDP). Sources claimed that the Fund demanded the government fix next fiscal year’s tax collection target at Rs8.3 billion.
Sources further claimed that the IMF also demanded to end phase-wise incentives of sales tax. It also demanded to increase sales tax on petrol from 11 percent to 17 percent, sources said, adding that Fund demanded to end Rs110 billion relief granted to textiles and other industries.
