Negotiations between IMF and Pakistan to resume today
Donor expresses concern over failure to implement RGST and eliminate power subsidies.
ISLAMABAD:
Policy negotiations between the International Monetary Fund (IMF) and Pakistan have proved unsuccessful so far. The negotiations focused on the country’s economic performance in light of the conditions imposed by the IMF as part of its standby arrangement (SBA).
The IMF termed the reforms undertaken towards achieving its targets deficient. According to an official of the ministry of finance, the IMF underlined the importance of imposition of reformed general sales tax (RGST) and the termination of subsidies on electricity. Negotiations between the two delegations are expected to continue on Tuesday.
The IMF delegation was led by Adnan Mazarei while Pakistan’s side was led by Finance Minister Dr Abdul Hafeez Shaikh. Earlier, the Pakistani delegation, headed by Secretary for Finance Salman Siddique, had led negotiations with the IMF.
Immediately after the negotiations, Shaikh, Siddique, Deputy Chairman of the Planning Commission Dr Nadeemul Haq and State Bank Governor Shahid Kardar left for Karachi to meet President Asif Ali Zardari.
During talks with the IMF, the Pakistani delegation presented the country’s plan for the revival of power sector and the mitigation of circular debt in that sector. The plan was developed in collaboration with the World Bank and Asian Development Bank.
The IMF was also told that, in order to end the subsidies on electricity, power tariffs will be increased by two per cent every month and that tariffs will rise by 17 per cent in this fiscal year.
The IMF was also informed of the progress made towards the implementation of RGST regime.The country’s team pointed out that the Federal Board of Revenue (FBR) will achieve the tax collection target of Rs1,604 billion for this fiscal year. Furthermore, the FBR emphasised that with the implementation of a flood tax, revenue collection may rise by Rs70-80 billion and reach Rs1,680 billion.
The donor’s delegation was also informed of measures taken to reduce the fiscal deficit and reduce expenditures to a minimum and the decision to hand over certain ministries to the provinces under the 18th amendment.
The Pakistani delegation will attempt to address IMF’s concerns over implementation of an income tax surcharge among others when negotiations continue. Important policy announcements are also expected on part of the government on Tuesday to facilitate the negotiations with the IMF.
The condition of implementing the RGST is a particularly important part of negotiations since it is tied to the country’s chances of receiving the next tranche under the SBA.
Published in The Express Tribune, November 2nd, 2010.
Policy negotiations between the International Monetary Fund (IMF) and Pakistan have proved unsuccessful so far. The negotiations focused on the country’s economic performance in light of the conditions imposed by the IMF as part of its standby arrangement (SBA).
The IMF termed the reforms undertaken towards achieving its targets deficient. According to an official of the ministry of finance, the IMF underlined the importance of imposition of reformed general sales tax (RGST) and the termination of subsidies on electricity. Negotiations between the two delegations are expected to continue on Tuesday.
The IMF delegation was led by Adnan Mazarei while Pakistan’s side was led by Finance Minister Dr Abdul Hafeez Shaikh. Earlier, the Pakistani delegation, headed by Secretary for Finance Salman Siddique, had led negotiations with the IMF.
Immediately after the negotiations, Shaikh, Siddique, Deputy Chairman of the Planning Commission Dr Nadeemul Haq and State Bank Governor Shahid Kardar left for Karachi to meet President Asif Ali Zardari.
During talks with the IMF, the Pakistani delegation presented the country’s plan for the revival of power sector and the mitigation of circular debt in that sector. The plan was developed in collaboration with the World Bank and Asian Development Bank.
The IMF was also told that, in order to end the subsidies on electricity, power tariffs will be increased by two per cent every month and that tariffs will rise by 17 per cent in this fiscal year.
The IMF was also informed of the progress made towards the implementation of RGST regime.The country’s team pointed out that the Federal Board of Revenue (FBR) will achieve the tax collection target of Rs1,604 billion for this fiscal year. Furthermore, the FBR emphasised that with the implementation of a flood tax, revenue collection may rise by Rs70-80 billion and reach Rs1,680 billion.
The donor’s delegation was also informed of measures taken to reduce the fiscal deficit and reduce expenditures to a minimum and the decision to hand over certain ministries to the provinces under the 18th amendment.
The Pakistani delegation will attempt to address IMF’s concerns over implementation of an income tax surcharge among others when negotiations continue. Important policy announcements are also expected on part of the government on Tuesday to facilitate the negotiations with the IMF.
The condition of implementing the RGST is a particularly important part of negotiations since it is tied to the country’s chances of receiving the next tranche under the SBA.
Published in The Express Tribune, November 2nd, 2010.