IMF rejects tax relief on foreign investment projects

The International Monetary Fund (IMF) has rejected Pakistan’s request to grant tax exemptions for foreign investment projects, Express News reported on Wednesday citing sources.

The Special Investment Facilitation Council (SIFC) had sought the exemptions during a detailed briefing to the IMF delegation, arguing that tax relief would help attract foreign investors. However, the global lender refused the request, maintaining its stance on fiscal discipline.

During the briefing, SIFC officials presented investment opportunities, governance structures, and infrastructure plans.

A key focus was the proposed railway project linking Chagai to Gwadar, intended to facilitate the transportation of minerals from the Reko Diq mine to the port city.

Pakistani officials urged the IMF to allow tax exemptions for this strategic initiative, citing its importance for economic growth.

The feasibility study for the railway line was conducted in collaboration with the Ministry of Finance and the Ministry of Railways. Officials revealed that potential investor nations have demanded state guarantees before committing funds.

However, under the ongoing loan programme, the Pakistani government cannot offer such guarantees for every investment.

Previously, the IMF has agreed to the government's proposal to reduce electricity prices, with a final decision expected next month.

Sources indicated that electricity base tariffs could be reduced by Re1 to Rs2 per unit, with both the National Electric Power Regulatory Authority (NEPRA) and the Ministry of Energy now authorised to adjust rates.

However, the IMF has expressed concern over delays in the privatisation of Distribution Companies (DISCOs). The IMF stated that improvements in the power sector are unlikely without first addressing the performance of these companies.