ISLAMABAD: The International Monetary Fund (IMF) has been pressing Pakistan to expand tax base and increase revenue generation – which is again one of the main conditions set under the $3bn stand-by arrangement – after the country received $1.2bn in first tranche last week.
In this connection, reports suggest that the IMF has listed the real estate and agricultural sectors for having a huge potential and sought a plan from the government on this subject.
Meeting the IMF conditions is a priority for Pakistan as the remaining amount of $1.8 would only be released only after two reviews, meaning that there are going to more tranches.
However, the decision would be taken by either by the caretaker setup or by the new government elected by after the upcoming general elections as Prime Minister Shehbaz Sharif has already made it clear that they would leave the office before August 14.
Last week, Shehbaz had promised that Pakistan would not violate the agreement – a very important signal given how the PTI-government damaged the country’s standing around the world by not implementing the very deal it had signed with the world’s top lender.
Increasing energy prices, interest rates and tax collection remains IMF’s focus as its managing director, Kristalina Georgieva, had stressed – soon after the top lender approved the deal – that Pakistan would have to accelerate structural reforms.
Praising the coalition government for the 2023-24 budget, she said it was a welcome step toward fiscal stabilization, while calling for enhancing tax collection, which, she said, was critical to strengthen public finances, and to eventually create the fiscal space needed to bolster social and development spending.
At the same time, she called for reducing state expenditure and bringing changes in the energy sector through steps like increase in tariff while modifying the subsidy structure.
“Maintaining discipline over non-critical primary expenditure will be essential to support budget execution within the envisaged envelope. In parallel, the authorities urgently need to strengthen energy sector viability by aligning tariffs with costs, reforming the sectors cost base, and better-targeting power subsidies.”
Last week, the National Electric Power Regulatory Authority (Nepra) gave approval to a rise in the base tariff of electricity by Rs4.96 per unit and the sent the proposal to the federal government.
Although the increase in the base tariff, the hike was expected to be below Rs2.50 per unit. The decision – a product of the deal reached the IMF – represents the conditions that will certainly further burden the people who are already rattled by the record-breaking inflation.
