EconomyPakistan

IMF Receives Commitment from Pakistan for Electricity and Gas Price Increase

Pakistan and the International Monetary Fund (IMF) have made substantial progress in their negotiations to secure the final tranche of $1.1 billion under a standby arrangement. The two parties are expected to reach a staff-level agreement early next week, according to sources from the Finance Ministry.

As part of the agreement, Pakistan has committed to implementing timely increases in electricity and gas tariffs. This move is expected to facilitate cost recovery, with the electricity tariff set to increase further from July 1. In addition, mechanisms will be established for monthly, quarterly, and annual adjustments.

In a bid to bolster tax revenue, the government has also pledged to abolish tax exemptions. This includes exemptions related to income tax, sales tax, and duties. The current annual tax exemption, amounting to Rs2.239 trillion, is planned to be phased out. The government has further committed to gradually document the economy.

However, the government has assured that it will not issue any new tax exemptions or amnesty schemes in the upcoming budget. Exemptions for foreign diplomatic missions and non-profit charitable organizations will remain in place.

The IMF has emphasized the importance of protecting beneficiaries under the Benazir Income Support Programme (BISP). In response, the government has committed to increasing the number of beneficiaries by June.

The IMF has also highlighted the need for ongoing reforms to maintain economic stability. This includes maintaining a tight monetary policy and adhering to a market-based exchange rate policy.

The progress in the economic review talks signifies a concerted effort by Pakistan and the IMF to address key economic challenges and pave the way for sustainable growth and stability in the country’s economy.

Upon successful completion of the negotiations, Pakistan will receive the final installment after the approval of the IMF’s Executive Board.

There have been some controversies surrounding the IMF deal. The PTI party has been accused of trying to sabotage the deal, and the IMF has expressed displeasure at Pakistan’s premature claim of meeting financial targets.

Despite these challenges, Pakistan has assured the IMF of its commitment to increase electricity prices.

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