Deadlock continues over IMF tax targets

Pakistan not on lender’s board meeting agenda scheduled for 14th

ISLAMABAD:

Pakistan and the International Monetary Fund (IMF) still have differences persisting over the estimates for the tax collection targets in the federal budget for the next fiscal year.

The IMF Executive Board meeting has been scheduled for June 14.

However, Pakistan is not on its schedule as the country has been unable to make any progress on the staff-level agreement with the global lender.

The deadlock between Pakistan and the IMF on the revival of the loan programme remains, but the government is hopeful of a staff-level agreement with the global lender by June 30.

According to sources, the IMF is pushing Pakistan to take the tax target to Rs 9.80 trillion.

However, the finance ministry is proposing to set an annual tax target of 9.20 trillion.

According to a Bloomberg report, in its last-ditch efforts to revive the stalled IMF loan, Pakistan is eyeing to secure $2 billion in external financing to bridge the $6 billion gap for resuming the bailout programme.

The finance ministry, in an emailed response to Bloomberg, said the government had lined up $4 billion in external financing and hoped to strike a deal with the Washington-based lender before unveiling the budget on June 9  (Friday).

The government remains on tenterhooks, with urgency growing for resuming the $6.7 billion programme -- signed in 2019 and set to expire in June this year -- as external financing and exchange-rate policy among the biggest hurdles.

Because of the disagreements between the local authorities and the lender, the ninth review has been stalled for more than six months.

It is one of the longest delays for a review.

“Pakistan remains committed to completing the IMF programme and has already demonstrated its seriousness,” the ministry said.

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The ministry added that it remained committed to mobilising additional liquidity despite a significant contraction of the current account deficit that has reduced the requirement.

Saudi Arabia and the United Arab Emirates have committed to provide fresh financing of $3 billion to Pakistan.

China and its state-owned banks have rolled over $4 billion in loan commitments.

In an email to Bloomberg, IMF’s Resident Representative for Pakistan Esther Perez Ruiz said the programme would restart once the authorities followed the lender’s programme goals, present adequate financing while presenting the budget, and there was “proper market functioning” of the Pakistani rupee.

“[The] IMF staff continues the engagement with the Pakistani authorities to pave the way for a board meeting before the current programme expires,” the official added.

Pakistan has to repay around $22 billion of external loans -- five times its foreign exchange reserves -- during the next fiscal year, beginning in July, according to Columbia Threadneedle Investments.

The coalition government has taken a host of measures -- including raising taxes, hiking energy prices, and allowing the rupee to weaken against the dollar -- to meet the IMF demands.

Once the IMF loan comes in, it will allow Pakistan to unlock further financing from other multilateral lenders.

These funds will help the $350 billion economy overcome a dollar crunch, ease supply shortages, and pull Pakistan out of default risks ahead of the elections -- scheduled to take place later this year.

(With input from News Desk)