ISLMABAD: The visiting IMF team has informed Pakistani authorities that the next bailout package under the Extended Fund Facility (EFF) will only be considered after presenting an aligned upcoming budget for the fiscal year 2024-25 and securing its approval from parliament.
This could initiate formal negotiations and lead to a staff-level agreement for a fresh bailout package, possibly augmented by $6 to $8 billion in climate finance, likely in July 2024.
According to a news report, the IMF team collected data on major economic fronts and specified the type of budget they expect for 2024-25. The government needs to devise a roadmap for increasing the tax-to-GDP ratio, which might decline to 9 percent of GDP for the current fiscal year.
The FBR is struggling to collect Rs 9.415 trillion, and independent experts predict a shortfall. If the FBR collects Rs 9 trillion, the IMF will require an increase to over Rs 12 trillion in the next budget, necessitating a Rs 3 trillion increase despite a nominal growth rate of 16%. Non-tax revenue targets will also rise, with a carbon levy under consideration.
On the expenditure side, the IMF team urged the government that it must rationalise SOEs, pensions, and subsidies to reduce current expenditures. Development projects of a provincial nature will be abandoned in the next fiscal year.
Regarding tariffs, the IMF has called for raising the power tariff through baseline, fuel price adjustment, and quarterly adjustments. Gas tariffs will also increase.
For solar net metering, the government plans to hire a Chinese consultant to study the issue independently due to its impact on DISCOs’ grids and the power sector’s fiscal woes.
