IMF experts invited to woo provinces

Experts from Australia and United States to deliberate RGST issue with provincial and federal governments in January.

ISLAMABAD: The federal government has invited experts from the International Monetary Fund (IMF) to convince provincial governments that the implementation of the reformed general sales tax (RGST) will be in their greater interests in the future.

The Express Tribune has learnt that experts from Australia and United States will deliberate the issue with provincial and federal governments during a meeting in the first week of January.

“The authors of the RGST have been invited by the Ministry of Finance to negotiate issues pertaining to this particular tax with the provincial governments directly,” explained a source.

The decision to invite IMF experts was taken by the Ministry of Finance after it failed to address provincial governments’ reservations about the RGST. This decision was likely taken to persuade the IMF to grant Pakistan an extension in the deadline for implementing the RGST. The current deadline is December 31.

The disbursement of the next tranche of $3.4 billion out of the $11.3 billion standby arrangement hangs in the balance.

Provincial governments have made it clear that the legislation required to implement the RGST will not be possible unless political parties’ apprehensions were addressed.

The federal government, according to a source, is also not willing to take unpopular decisions that are bound to result in a further price hike in the country.

Pakistan had said in June that it would introduce the reformed general sales tax (RGST) regime by October 1, but that deadline has now slipped to December 31.

The federal government had also agreed to raise electricity tariffs by around two per cent a month, according to official sources, to try to eliminate the annual subsidy worth $2 billion given to the power sector. This promise has so far been fulfilled by the federal government despite resistance from provincial governments.

Published in The Express Tribune, December 21^st, 2010.