IMF sees more potential for revenue collection

Visiting delegation expresses concern over taking loss-making utilities off privatisation list

ISLAMABAD: Pakistan may have to make upward adjustment in its annual tax collection target besides expanding the list of privatisation to qualify for a bailout package by the International Monetary Fund (IMF), according to initial assessment of the global lender after the talks with Pakistani authorities.

Harald Finger, the IMF Mission Chief, “shared his initial assessment with the Finance Minister Asad Umar on various sectors of the economy,” the Finance Ministry said in an official handout, without disclosing details of the assessment.



The minister held his first meeting with the visiting IMF mission which arrived in Islamabad last Wednesday to assess Pakistan’s financing needs. The Fund shared the assessment following the delegation’s interaction with officials of relevant ministries and entities, the Finance Ministry added.

Sources said that the IMF’s assessment of gross financing needs for this fiscal year and the gap was lower than that projected by Pakistan. They added that the IMF was projecting the financing gap in single digit. However, the exact figure could not be ascertained.

The Ministry of Finance sources said that one of the main objections raised by the IMF was about the exclusion of any major loss making entity from the government’s privatisation agenda.

The PTI government delisted Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM) and all power sector distribution and generation companies from the privatisation programme a week before the start of the IMF visit.

The sources said that the Fund was not impressed by the government’s plan for restructuring of the loss-making enterprises. Its major concern was that there had been no concrete plan to stop bleeding of these organizations during an interim period.

The government assured the IMF that it would tackle the governance issues of these enterprises by placing them in a Sovereign Wealth Fund Company. The government could introduce a new law to set up the company.

The other issue was the Rs4.4 trillion annual revenue collection target of the FBR. The IMF’s assessment was that the FBR should collect more in the wake of the windfall gains after currency depreciation and increase in prices of goods.

The government has also imposed regulatory duties on hundreds of items. The IMF’s assessment was that the FBR’s current growth rate in revenue collection should be nearly doubled without introducing new measures, said the sources. The sources hinted at the possibility that the IMF would pitch a higher FBR target.

The IMF’s assessment was based on a double-digit nominal GDP growth rate. It suggested to the government to review its tax exemption regime with a view to withdrawing some of these exemptions, the sources added.

However, Pakistani authorities were of the view that only socially-sensitive tax exemptions are left while all other exemptions were withdrawn under the last IMF programme.

The sources said that the IMF also raised the issue of implementing the risk-based audit system. The Pakistani authorities assured to conduct audit of at least 7.5% of the total income tax and sales tax returns, said the sources.

The IMF mission again met with the Power Division officials on Tuesday to finalise a plan for addressing the circular debt issue and also discussed the tariff regime, which was recently approved by the federal cabinet.

The Finance Ministry handout stated that Asad Umar shared with the IMF delegation the PTI government’s vision on economy. He referred to the corrective measures being taken to remove imbalances in the economy, saying that the new government had come to power with an agenda of wide-ranging reforms, it added.



The minister said that the government has a strong resolve for implementing deep structural and institutional reforms. “It is committed to safeguarding the poor and vulnerable segments of the society and shall invest more in social protection, human development and creation of employment opportunities,” the minister added.

Along with structural and governance reforms, revival of domestic industry and export sector are high priorities of the government, said Umar, adding that Pakistan looked forward to receiving IMF support for the government’s efforts to achieve an economic turnaround.

The mission will continue its discussions with the relevant authorities during the next several days, said the Finance Ministry.