ISLAMABAD: A request by the Pakistani government prompted the Executive Board of the International Monetary Fund (IMF) to postpone the Sixth Review that was schedule for January 12, 2022, and the delivery of a $1 billion tranche under the Extended Fund Facility (EFF).
According to top government sources in Pakistan, the IMF Executive Board has withdrawn consideration of Pakistan’s case for the completion of the 6th review slated for January 12 and the disbursement of $1 billion under the EFF programme from its calendar in 2022. On January 12, 2022, the Executive Board of the International Monetary Fund will solely examine Nepal’s request under the Extended Credit Facility.
So, this week marks the beginning of an intriguing phase in which Parliament must begin debating the two bills. The IMF wants Pakistan to approve the Tax Laws Supplementary Bill and the second, the State Bank of Pakistan (SBP) Amendment Bill 2021. Both houses of Parliament have to vote on the contentious State Bank of Pakistan Amendment Bill 2021 before approving it.
The Tax Laws Supplementary Bill, according to the Ministry of Finance, is likely to be adopted by the National Assembly next week. As both Houses of Parliament must approve the SBP Amendment, the Treasury will need to design an efficient approach to ensure the speedy passage of this legislation through both chambers of parliament.
The Pakistani side cited both the Tax Laws Supplementary Bill and the State Bank of Pakistan (SBP) as two requirements set out by the IMF’s staff. The Tax Laws Supplementary Bill 2021, in which the government proposed withdrawing GST exemptions, jacking up tax on vehicle registration, increasing withholding tax on mobile users from 10% to 15%, and other administrative changes, and promised to collect data on the mini-budget, was currently being examined by the upper house of Parliament (Senate). Even if the Tax Laws Supplementary Bill is approved by Parliament in its current form, independent economists estimate that the withdrawal of GST exemptions and other taxation measures will only bring in a maximum of Rs 200 billion, so it was unclear how much the IMF staff had estimated revenues from the withdrawal of GST exemptions and other taxation measures.
The SBP Amendment Bill 2021 has yet to be debated in Parliament since many independent economists and experts believe it needs considerable revisions and amendments before it can be passed. There might be a backlash from the opposition benches if the administration does not act.
Esther Perez Ruiz, the International Monetary Fund’s Resident Representative in Pakistan, responded to a question about the exact date of the Executive Board’s consideration of Pakistan’s request: “It has been requested by the authorities to postpone the board meeting for consideration and eventual approval of the 6th EFF review.” As of right now, no one knows when the meeting will take place again.
IMF Executive Board members are expected to convene in late January or early February 2022 to evaluate Pakistan’s request for the completion of the sixth review and the disbursement of a $1 billion tranche under the EFF programme, as per the Pakistani officials.
