Talks between Pakistan and the International Monetary Fund (IMF) failed to make headway on Monday as the two sides are yet to reach an agreement on a number of key issues.
Pakistan has not yet agreed to the IMF’s additional taxation measures which could fetch an additional Rs300bn and hike the petroleum levy, as per a report in The News.
Speaking to The News, top government authorities expressed confidence that negotiations will conclude before the budget which is scheduled to be announced in three days.
The government plans to present the Budget 2021-22 in Parliament on June 11, 2021.
The publication reported that SAPM on Finance and Revenues Dr. Waqar Masood has been playing a “catalyst role” to continue the negotiation process so efforts are underway to conclude talks within the next 24 hours.
“InshaAllah”, we will conclude talks with the IMF ahead of the announcement of budget in order to reflect it in our budget,” said one top functionary of government on Monday night.
One official said if the deadlock persists, talks between the two sides will continue after the budget as then, the government will have some time to include amendments as well.
There are some major outstanding issues between both sides as the IMF wants a clear-cut strategy for achieving the FBR tax collection target of Rs5.8 trillion
The nominal growth could fetch the FBR target at Rs5.3 trillion if they took the base collection of Rs4.7 trillion for the outgoing fiscal year then the FBR would have to take additional measures to bring the remaining Rs480 billion into kitty.
The FBR has estimated that the abolishing of tax exemption might fetch Rs80 to Rs140 billion, hence the IMF is asking Pakistan to take measures to bridge the remaining gap to materialize Rs5.8 trillion for the next budget.
The next thorny issue is the petroleum levy as the IMF envisaged collection of Rs600 billion in the coming budget so the government will have to collect Rs30 per litre on POL products with effect from July 1, 2021.
As reported earlier, Pakistan has been pushing for a reduction in the petroleum levy, in the range of Rs450 to Rs500 billion. On hiking of power tariff, the IMF wants a crystal clear roadmap otherwise it says the circular debt will continue mounting.
The government is expected to hike the power tariff by October 2021 but the final decision will be made by the prime minister, who is expected to speak to the managing director of the IMF in a few days.
The SBP’s amendments is another bone of contention between the two sides. The Ministry of Finance wanted to review them during the parliamentary proceedings. The government does not want a breakdown of ongoing talks so they are hopeful that a positive outcome will be achieved soon.