The International Monetary Fund (IMF) has proposed that Pakistan impose a General Sales Tax (GST) on petroleum products and increase the existing petroleum levy to Rs70 per litre, as the two sides began talks in Islamabad.
An IMF delegation, led by Pakistan Mission Chief Nathan Porter, arrived in Islamabad on Monday to hold technical discussions on the country’s economic situation.
This follows the IMF’s approval in September of a new $7 billion, 37-month loan agreement for Pakistan, which includes requirements for sound economic policies and reforms to ensure macroeconomic stability. As part of the agreement, Pakistan received an immediate disbursement of $1 billion.
Pakistan has entered into 22 IMF bailout programs since 1958, and the current discussions are focused on meeting fiscal targets and strengthening key sectors.
Sources cited by Dawn News indicated that officials from the Federal Board of Revenue (FBR), the finance ministry, the State Bank of Pakistan, and the energy ministry have met with the IMF team. The talks have covered strategies to meet FBR revenue targets and implement reforms in the energy sector.
A key proposal on the table is the introduction of GST on petroleum products, which are currently exempt. The government is also considering increasing the petroleum levy, which is currently set at Rs70 per litre, up from Rs80 per litre earlier this year as part of the IMF bailout package.
In addition to discussions on fiscal policies, the agenda includes strategies for external financing, new tax measures, and the potential privatisation of state-owned entities, such as Pakistan International Airlines (PIA).
The IMF delegation is expected to remain in Pakistan until November 15 and will review the country’s economic performance for the first quarter of the fiscal year.
Sources within Pakistan’s finance ministry have informed media that the IMF delegation currently in Islamabad will not be discussing the first review of Pakistan’s Extended Fund Facility (EFF) program. Instead, Pakistani officials are preparing to brief the IMF team on the country’s economic performance during the first quarter of the current fiscal year.
Economic experts have raised concerns over the ruling coalition, led by the Pakistan Muslim League-Nawaz (PML-N), for failing to meet key revenue targets. This has sparked fears that the IMF may propose additional, and potentially unpopular, measures for the current fiscal quarter (October to December).
Former finance minister Miftah Ismail criticized the government’s economic targets, particularly the revenue goals set by the Federal Board of Revenue (FBR), describing them as “unrealistic.” Ismail pointed to a potential decline in revenue due to falling inflation rates, which have recently dropped to single-digit levels, further complicating efforts to meet the FBR’s ambitious targets.
