Islamabad: The International Monetary Fund (IMF) has voiced its disapproval regarding Pakistan’s premature declaration of achieving all structural benchmarks, quantitative, and indicative targets even prior to the conclusion of the review process by the global financial institution.
A delegation from the IMF has arrived in Islamabad to engage in discussions before disbursing the crucial final tranche of USD 1.1 billion from a USD 3 billion bailout package agreed upon last year.
Media reports suggest that Nathan Porter, the IMF Mission chief, along with his team, expressed dismay over the haste exhibited by the finance ministry in asserting compliance before the review process of the USD 3 billion Standby Arrangement (SBA) program was completed. The IMF team had just commenced the review and is expected to provide recommendations only after analyzing official data across various sectors of the national economy.
Previously, the finance ministry issued an official statement asserting fulfillment of all structural benchmarks and other targets without awaiting feedback from the IMF.
During the initial review talks, the IMF mission scrutinized the finance ministry team, revealing a lack of preparedness to respond to inquiries, as reported by The News International.
Finance Minister Aurangzeb acknowledged the IMF’s concerns, assuring that such premature proclamations would not recur in the future.
Pakistan and the IMF have initiated discussions for the completion of the second review and the negotiation of the Memorandum of Economic and Financial Policies (MEFP). Subsequently, the release of the final tranche of USD 1.1 billion will be presented before the Fund’s Executive Board in the second week of April 2024.
Top official sources confirmed the likelihood of a potential mini-budget, with the IMF possibly recommending tax rate adjustments, particularly concerning the General Sales Tax (GST), to bolster immediate revenue generation. This recommendation would materialize if the Federal Board of Revenue (FBR) falls short of achieving the tax collection target of Rs879 billion for March 2024.
Furthermore, the IMF inquired about the feasibility of meeting the last quarter’s (April-June) target to achieve the annual tax collection goal of ₹9,415 billion. Queries regarding the timeline for introducing a simplified tax scheme for retailers and the government’s commitment to this initiative remained unanswered by FBR officials.
Crucial discussions with energy sector representatives focused on devising a plan to contain circular debt accumulation. The Ministry of Energy indicated the discontinuation of gas subsidies for fertilizer plants, seeking guidance on affordable fertilizer prices for farmers to alleviate the agricultural sector’s input costs.
In an official statement issued by the finance ministry, it was highlighted that an IMF mission met with Federal Minister for Finance and Revenue Muhammad Aurangzeb at the Ministry of Finance to conduct the Second Review of the Stand-by Arrangement (SBA). The finance minister reiterated the government’s dedication to collaborating with the IMF to implement reforms aimed at fostering economic growth and stability in Pakistan.
