In order to secure the next $502 million loan tranche from the International Monetary Fund (IMF), Pakistan has agreed to slap roughly Rs40 billion in additional taxes to bridge the shortfall in its revenue targets.In return, the IMF agreed to give Pakistan two waivers after it failed to deliver on two key conditions — the quarterly target of restricting the budget deficit to Rs306 billion and reduction in Net Domestic Assets (NDA). With the fresh waivers, the lender has so far given Islamabad 14 waivers in the nine reviews of Pakistan’s economy, highlighting its lenient policy towards implementation of structural reforms. “The [IMF] mission and Pakistani authorities have reached a staff level agreement on the completion of the ninth review under the Extended Fund Facility (EFF) arrangement,” IMF’s Washington-based mission chief for Pakistan, Harald Finger, announced at a news conference alongside Finance Minister Ishaq Dar in Islamabad on Thursday. The IMF has identified four areas where the government needs to work – taxation, energy sector reform, privatisation of public-sector enterprises and improving the investment climate. There is some good news for consumers as the IMF revised its inflation forecast to 3.7 percent against the 4.7 percent estimate and kept its growth projection at 4.5 percent. Pakistan’s foreign exchange reverses remain at around $20 billion while other targets, including net international reserves and central bank borrowing, have been met. While these are important for the fiscal health of the state, the most critical target remains the net budget deficit where the government has missed its revenue targets by Rs40 billion once again. Finance Minister Dar has said that the net shortfall was lower, around Rs23 billion due to expenditure control, but the minister remained vague about where exactly this was done at a time when most government spending seems to be spiralling out of control. The deficit is despite the fact that revenue collection in October increased by 22 percent compared to last year. While Dar has promised no new tax measures citing the increased collections, the imposition of withholding tax on bank transactions is set to be extended for another 120 days. With the deadlines set for the privatisation of the Pakistan Steel Mills and Pakistan International Airlines nearing, Dar vaguely revealed that the government would look for strategic partners for the public-sector entities, which barely sounds like much of a privatisation plan. The IMF review has cleared the government’s performance once again – while maintaining some reservations. Anything else would have been an unexpected move; Pakistan remaining true to playing a yes man to most IMF dictates. A surprising call to get out of the IMF trap has come from Saleem Mandviwalla, a former finance minister and currently a Senate Committee chairman, but this is almost impossible given our situation.
pk.shafaqna.com
