Govt, IMF yet to develop understanding on power subsidies, primary balance

The government and International Monetary Fund (IMF) have yet to develop a comprehensive understanding on power sector subsidies and primary balance.

Sources said that the government has not reached an agreement with the Fund on power sector subsidies. The Fund has expressed concerns over provincial surplus as it would not be achievable given the budgets presented by the provinces.

As a result, the government would not be able to achieve the primary surplus of around 0.2 to four percent in the next fiscal year from the existing negative by 1.6 percent even if the federal board of revenue tax collection is increased.

Sources also said that the Fund is not ready to believe the budgetary numbers and stated that the budget was not based on real expenditures, which means that the actual figure of the inflation was not taken into account.

Thus the Fund believes that expenditures in the budget for the next fiscal year are understated on the various accounts.

Pakistan Bureau of Statistics under the alleged influence of the incumbent government is preparing a consumer price index based on those products or items which Utility Store Corporation is selling at subsidised rates and IMF has shown concern over this methodology.

Sources said that government wants to control the rising price of the dollar so that’s why the economic team in late-night fed the information to give a positive impression to the market.

Another senior official of the finance ministry said that it will take another one week to reach an agreement with the IMF and the Finance minister will announce these measures in the winding-up speech.

It was reported that Pakistan and IMF reached an understanding on the federal budget for 2022-23 after authorities committed to generate Rs436 billion more taxes and increase petroleum levy gradually up to Rs50 per litre.
In addition, the IMF mission will finalise monetary targets with the State Bank over the next couple of days and, in the meantime, share the draft of a Memorandum of Economic and Financial Policy (MEFP).
Sources said that IMF has asked Pakistan to take additional revenue measures in order to achieve the next year’s revised Rs7.4 trillion revenue target. It was also reported that the government agreed to impose one percent poverty tax on firms earning Rs150 million, two percent on those earning Rs200 million, three percent on over Rs250 million and 4 percent on Rs300 million above.
Former finance minister Shaukat Tarin on Wednesday also said that a potential deal with the IMF for the revival of the Extended Fund Facility (EFF) was still weeks away.

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