The government on Friday expressed its willingness to adopt a flexible approach towards the fiscal year 2023-24 (FY24) budget, in response to concerns raised by the International Monetary Fund (IMF).
In a statement released by the Ministry of Finance, it was stated that the government is actively engaged with the IMF to reach an agreeable solution.
The IMF’s reservations are linked to the release of a pending disbursement of $2.5 billion under the 2019 Extended Fund Facility (EFF), which is contingent upon the government satisfying the IMF’s requirements regarding the FY24 budget.
The government is committed to completing the ninth review of the $6 billion IMF program, which has been pending since October. Esther Perez Ruiz, the IMF’s representative for Pakistan, has expressed concerns about certain aspects of the FY24 budget. These include a proposed tax amnesty scheme and missed opportunities to expand the tax base in a progressive manner. Ruiz also highlighted the impact of new tax expenditures on the fairness of the tax system and resources allocated for vulnerable recipients of the Benazir Income Support Programme (BISP) and development spending.
In response, the finance ministry defended the tax exemptions included in the budget, stating that they serve as drivers of growth in the real sectors of the economy. The ministry emphasized that the magnitude of the tax exemptions is relatively small. It also highlighted the government’s efforts to broaden the tax base, with over 1.16 million new taxpayers added in the last 11 months.
Regarding the proposed tax amnesty scheme, the ministry clarified that it pertains to an existing provision of the Income Tax Ordinance, where the value is being assigned in dollars. The ministry assured that pro-poor initiatives in the budget extend beyond BISP beneficiaries, with increased funding for targeted subsidies on essential food items for families based on a proxy means test (PMT) scorecard of 40.
Negotiations with the IMF are ongoing, and the government remains committed to swiftly resolving technical issues. The finance ministry noted that the external financing matter has been amicably resolved through recent communication between the Prime Minister and the IMF Managing Director. While the FY24 budget was not part of the ninth review, the government has shared the budget numbers with the IMF and maintains continuous engagement on the subject.
