The International Monetary Fund (IMF) has rejected Pakistan’s proposal to eliminate the General Sales Tax (GST) on electricity bills, which aimed to provide relief to consumers. This decision was made during ongoing economic review talks between Pakistan and the global lender.
The Pakistani government also presented suggestions to reduce the tax burden in various sectors, including real estate, property, beverages, and tobacco. Sources familiar with the negotiations indicated that any tax cuts in these sectors would require IMF approval. Furthermore, there are discussions around reducing tax rates for salaried individuals in the upcoming budget.
To bridge its fiscal gap, the government has outlined a strategy to generate Rs 250 billion through multiple sectors, including retail. This effort will rely on trader-friendly initiatives, enhanced compliance risk management, and improved administrative measures, with final approval contingent on the IMF’s endorsement.
On the energy front, both parties are working on strategies to tackle the growing circular debt. However, the IMF has refused to extend the winter relief package for industrial and agricultural sectors across the country.
In terms of managing the circular debt, Pakistan plans to secure a Rs 1,250 billion loan from commercial banks, with an agreed interest rate of 10.8%. The IMF has also urged the government to implement gas tariffs on captive power plants.
As the discussions continue, the Federal Board of Revenue (FBR) has reassured the IMF that the tax shortfall of Rs 605 billion will be addressed without the need for a mini-budget. A plan has been submitted to the IMF to bridge this gap through the settlement of pending tax cases.
The IMF has been informed that the revenue target should be met by June, or else expenditure cuts will be necessary to make up the deficit. The FBR is optimistic about securing Rs 157 billion through an upcoming Supreme Court ruling on super tax, with the apex court set to hold a crucial hearing on March 10. Of this, Rs 57 billion is expected from the Supreme Court decision, and Rs 100 billion from the High Court’s verdict.
Additionally, the FBR has raised Rs 23 billion through the windfall profit tax imposed under Section 99D and Rs 72 billion from the advance deposit ratio in banks.
