IMF Expresses Discontent Over Pakistan’s Premature Achievement Claims

The International Monetary Fund (IMF) has expressed dissatisfaction with the Pakistani Ministry of Finance’s premature announcement that it had met all structural benchmarks and targets. This announcement was made before the IMF had completed its review under the $3 billion Standby Arrangement (SBA) programme.

The IMF team, led by Mission Chief Nathan Porter, was taken aback by the ministry’s declaration, which was made before the review process had been completed. The IMF team had just begun their review and were planning to provide their recommendations after analysing data from various sectors of the national economy.

The finance ministry had announced in an official handout ahead of Wednesday’s talks that they had met all structural benchmarks and other targets, even before receiving any feedback from the IMF. The ministry spokesperson did not respond to questions about this report.

During the initial session of the review talks, the IMF review mission questioned the finance ministry team intensively. The team seemed unsure of how to respond. However, Finance Minister Aurangzeb assured that such an incident would not occur again in the future.

Pakistan and the IMF have begun discussions for the completion of the second review and to reach an agreement on the Memorandum of Economic and Financial Policies (MEFP). Following this, the release of the final tranche of $1.1 billion will be presented to the Fund’s Executive Board in the second week of April 2024.

There is a possibility of a mini-budget being introduced, with the IMF potentially recommending increases in various tax rates, particularly the General Sales Tax (GST), to generate immediate additional revenues. This will only be confirmed if the Federal Board of Revenue (FBR) falls short of the tax collection target of Rs879 billion for March 2024.

The IMF team also questioned the likelihood of achieving the target for the last quarter (April-June) to meet the desired annual tax collection target of Rs9,415 billion. They also inquired about the timeline for introducing a simplified tax scheme for retailers and the government’s commitment to this initiative. The FBR officials were unable to provide a response.

In addition, the IMF held important discussions with senior officials from the energy sector, asking them to devise a plan to limit the circular debt and prevent further accumulation. The Ministry of Energy officials stated that they were planning to withdraw gas subsidies for fertiliser plants and were seeking guidance on providing cheaper fertiliser bags for farmers to reduce the input costs of the agricultural sector.

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