The International Monetary Fund (IMF) delegation visiting Pakistan has expressed dissatisfaction with the Ministry of Finance’s premature declaration of meeting all structural benchmarks and targets before the completion of the review process. According to a report, IMF Mission Chief Nathan Porter and his team expressed their concern over the Ministry’s announcement before they had the chance to analyze official data and formulate their recommendations.
Prior to the commencement of discussions on Wednesday, the Ministry of Finance released a statement asserting the achievement of all benchmarks and targets without waiting for feedback from the IMF. Questions regarding this announcement directed to the ministry spokesperson went unanswered.
During the initial review talks, the IMF delegation reportedly questioned the finance ministry team extensively, leaving them seemingly unsure how to respond. Finance Minister Aurangzeb acknowledged the situation, pledging to avoid such premature announcements in the future.
The discussions between Pakistan and the IMF aimed at completing the second review and reaching an agreement on the Memorandum of Economic and Financial Policies (MEFP) are underway. The release of the final tranche of $1.1 billion is expected to be presented to the IMF Executive Board in April 2024.
There is speculation about the possibility of a mini-budget being introduced, with the IMF potentially recommending tax increases, particularly in General Sales Tax (GST), to address any revenue shortfalls. This could be necessary if the Federal Board of Revenue (FBR) fails to meet the tax collection target of Rs879 billion for March 2024.
The IMF team also inquired about Pakistan’s prospects for achieving the tax collection target for the last quarter (April-June) to meet the annual target of Rs9,415 billion. Additionally, they sought information on the timeline for implementing a simplified tax scheme for retailers, with questions raised about the government’s commitment to this initiative.
Crucial discussions were held with energy sector officials, focusing on devising a plan to curb circular debt accumulation. The Ministry of Energy indicated its intention to withdraw gas subsidies for fertilizer plants while seeking guidance on reducing fertilizer costs for farmers to enhance the agricultural sector’s productivity.
