Fund Pledge
ISLAMABAD: The visiting staff mission of the International Monetary Fund (IMF) has initiated direct communications with key bilateral partners to confirm committed support to Pakistan, addressing the external financing gap. Caretaker Finance Minister Dr. Shamshad Akhtar and IMF’s mission chief for Pakistan, Nathan Porter, led their respective sides in two detailed sessions on the first day of policy-level talks.
The discussions involved teams from the State Bank of Pakistan (SBP), planning, power, and petroleum divisions, Federal Board of Revenue (FBR), and Special Investment Facilitation Council (SIFC).
Officials noted that there seemed to be no significant challenges regarding the successful completion of the first quarterly review. The $710 million second tranche of the $3 billion Standby Arrangement (SBA) is expected to be disbursed in the first part of December, pending approval from the Fund’s executive board.
While overall progress is positive, the mission expressed concerns about the financing pipeline’s risks, amounting to about $28 billion in external needs during the current fiscal year. Overall, IMF mission communicates directly with partners, securing fund pledge to address Pakistan’s external financing gap in policy-level talks.
Talks Set to Conclude Tomorrow
On Monday, officials engaged with a key friendly country through its embassy in Islamabad, securing reassurance about promised financing. They plan to continue discussions with other countries on Tuesday before concluding policy discussions on November 15.
Authorities believe bilateral financing commitments are intact, along with the pipeline of funds from multilateral institutions like the World Bank, Islamic Development Bank, Asian Development Bank, and the IMF. However, about $5 billion of commercial loans and $1.5 billion in planned international bonds for the current fiscal year could be doubtful due to global economic conditions and uncertain financial markets.
To bridge the gap, officials suggest a $2 billion lower current account deficit than estimated in the Standby Arrangement (SBA). Positive signaling from the IMF and bilateral lenders, along with flows from the Special Investment Facilitation Council (SIFC), could minimize the gap in the second half of the fiscal year.
The mission raised matters related to SIFC-led policies during policy-level talks, emphasizing no more distortions in investment and revenue policies. The IMF urged a critical eye on tax base expansion and quality, focusing on increasing taxpayers for improved revenue rather than just return filers.
While no new taxes or rate increases were demanded at this stage, expanding the tax net to retailers through a fixed tax scheme and improving real estate taxation remained on the agenda. The Federal Board of Revenue (FBR) has issued statutory orders to notify sectors for the installation of point-of-sale counters.
Both sides agreed on trigger points for expanded taxation on the retail sector and real estate in case of any shortfall, particularly in December, to take effect from January 1. Discussions also covered improvements in anti-money laundering operations and the legal framework for trade-based money laundering.
Officials are hopeful about finalizing the memorandum of economic and financial policies before the mission’s departure. The caretaker government not only met the Fund’s requirement for no more government guarantees but also over-performed by retiring over Rs150 billion in guarantees.
