Government, IMF reach consensus to increase salaries, pensions 

LAHORE/ISLAMABAD: The Pakistan government and the International Monetary Fund (IMF) reached a consensus on Tuesday, on not putting a freeze on the increase in salaries and pensions of government employees and keeping electricity and gas tarrifs at their current level, in the upcoming budget.  

The issues came under discussion during the third round of talks between the Pakistani government and the International Monetary Fund (IMF) which ended on Tuesday, June 9. 

According to reports, the IMF had asked the Pakistani government to cut spending during the previous meetings. However, the government refused to do so citing the need to protect government employees and pensioners and the citizens battling the Covid-19 induced economic meltdown, from the effects of inflation. 

The agreement to not put a hold on the increase in salaries and pensions came after the government gave assurance to the IMF that it will not further increase its deficit and will  increase its non-tax revenues.

Media reports on May 30th had informed that the government was expected to raise salaries and pensions by 15-20 percent. However, currently there has been no official word from the authorities regarding the percentage raise to be announced on June 12 during the presentation of the federal budget. 

As per the consensus, the conditions of IMF related to the loan agreement, would remain relaxed till September 30, and after October, Islamabad will fulfill the conditions which are linked with the Extended Fund Facility (EFF) .

Earlier, The finance team had made it clear to the IMF that it will not be able to achieve the previously fixed targets under the prevailing circumstances.

Earlier on June 6, Director Communication Department IMF Gerry Rice stated that the IMF and Pakistani authorities remain closely engaged to bring the second review of the EFF to a positive conclusion, while taking into account the new conditions the fund is facing in Pakistan, and to ensure the programme delivers on its objectives.

"On the EFF, which was already in place with Pakistan, I can tell you that technical discussions with the authorities continue. They remain fluid with a view to bringing that second review of that program, that EFF, to a positive conclusion, as soon as possible. We're working with the authorities, constructively, to ensure that that can be brought to a positive conclusion, as soon as possible, while taking into account the new conditions that we're facing in Pakistan, and to ensure the program delivers on its objectives," he said. 

The IMF has already provided emergency financing of about $1.4 billion in April this year, in a bid to help the country deal with the COVID-19 crisis.

The Pakistan government is set to unveil the budget for the next year on June 12.

It was revealed on June 6 that the federal government had decided to present a tax-free budget for the fiscal year 2020-21. Sources privy to the matter said that the government will not introduce any new taxes in the forthcoming budget while harsh measures will be taken to curb tax evasion.

The Federal Board of Revenue (FBR) is expected to be given special powers to stop tax evasion in the country.