ISLAMABAD: As per an initial determination of the International Monetary Fund (IMF) after talks with Pakistani authorities, the country would likely need to make an upward adjustment in its annual tax revenue collection target to avail a bailout.
Also, it would require widening its list of privatisation to qualify for the IMF bailout, reports Express Tribune.
The initial assessment of the IMF was shared by its mission chief Harald Finger with Finance Minister Asad Umar, according to an official handout issued by the finance ministry.
This was Mr Umar’s first meeting with the IMF delegation since its arrival in Pakistan last week to determine the country’s financing requirements.
The delegation shared its initial assessment after conducting interaction with the officials of appropriate ministries and entities, said the Finance Ministry.
According to sources, the IMF’s determination of gross financing requirements for the current financial year and the difference was lower than that estimated by Pakistan.
The forecast for financing gap by the IMF was said to be single digit and the exact figure couldn’t be determined, said sources.
The IMF delegation’s main objection was related to the exclusion of any major loss incurring entity from the government’s privatisation plan, said sources in the Ministry of Finance.
Recently, the PTI government had taken Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM) and every power sector distribution and generation companies off the privatisation list a week before the visit of the IMF delegation.
Moreover, sources said the Fund wasn’t happy with the governments’ plan for the restructuring of the loss-making enterprises.
The IMF delegation’s express serious worry over the government’s inability to prepare a plan for stopping their losses during an interim period.
However, the government told the IMF delegation it would address governance issues of these loss-stricken enterprises by putting them in a Sovereign Wealth Fund Company.
In this regard, the government would bring a new law to establish the Sovereign Wealth Fund Company.
The other noteworthy problem was linked to the annual tax revenue collection target of Rs4.4 trillion and as per IMF’s determination the Federal Board of Revenue (FBR) should be collecting more considering the gains after currency depreciation and rise in prices of goods.
As per the IMF’s determination, the current growth rate in revenue collection of the FBR should almost be doubled without bringing new measures, said the sources.
Also, sources implied the IMF could maybe pitch a higher FBR target. The IMF’s determination was founded on a double-digit nominal GDP growth rate.
And it proposed the government to evaluate its tax exemption regime with a viewpoint to take back some of those exemptions, said sources.
But the Pakistani authorities said under the previous IMF programme all other exemptions had been taken back and now only socially-sensitive tax exemptions remained.
Also, the sources shared the IMF brought up the issue of executing risk-based audit system.
In this regard, the Pakistani authorities promised the IMF it would carry out an audit of around 7.5% of the total income tax and sales tax returns, stated sources.
The IMF delegation again met with the power division officials on Tuesday to conclude a plan for resolving the circular debt problem and deliberated the tariff regime, which was recently given go-ahead by the federal cabinet.