ISLAMABAD: The International Monetary Fund (IMF) has termed the potential escalation in regional tensions as a threat to the economy and has proposed additional taxes to cover the estimated revenue shortfall of Rs 194 billion in the first quarter of the current fiscal year.
Policy-level talks between Pakistan and the IMF for the second economic review have entered their final stages and consultations are underway between the two sides to finalize the draft Memorandum of Economic and Financial Policies.
Sources said that an economic team led by the Federal Secretary Finance met the IMF mission and Federal Finance Minister Muhammad Aurangzeb is also expected to meet the mission. The talks focused on finalizing the draft Memorandum of Economic and Financial Policies.
According to sources, other officials including Member Customs Policy from the FBR are involved in the talks with the IMF mission.
Sources said that discussions were also held on tax targets for the current fiscal year and measures to increase the tax net. During this, the IMF suggested additional taxes to meet the tax shortfall, but no agreement has been reached yet.
The government team said that the recovery of billions of rupees of liabilities stuck in tax dispute cases will help reduce the revenue shortfall, in addition to this, additional revenue will be collected through administrative and enforcement measures.
On the other hand, the IMF proposes that to meet the shortfall, taxes should be imposed on some sectors and the standard tax rate should be applied by returning the previously imposed concessional tax rate on some.
Sources said that a detailed briefing was given on the deregulation of the sugar sector, auto policy and tariff reforms in the talks.
According to sources, the aim of deregulation of the sugar sector is to reduce government control over the sugar industry so that the market itself determines prices and production. The production, prices and tariffs of vehicles will be determined through the auto policy.
The sources further said that in order to successfully complete the ongoing policy-level talks with the IMF, the federal government has also urged the provincial governments to immediately resolve their pending issues related to the IMF so that the ongoing talks on the second review of the $7 billion Extended Financial Arrangement (EFF) can be successfully completed by the end of the week.
Sources said that the Prime Minister’s Office has also contacted federal officers posted in provincial capitals and directed them to play their role in coordinating the progress on pending issues and future targets in accordance with the commitments made to the IMF. These instructions have been given not only for the EFF but also with regard to the $1.4 billion Climate Resilience and Sustainability Facility. Similar instructions have also been issued to federal ministries.
Provincial Chief Secretaries and Finance Secretaries were directed to submit their latest progress reports within 24 hours and clearly state the reasons for non-fulfillment or delay of any target.
Sources said that the IMF has termed the possible increase in regional tensions as a threat to the economy and the IMF says that there is a risk of slowdown in economic growth due to increasing tensions.
According to the IMF, the global situation remains uncertain, increasing regional tensions can affect external stability and uncertain conditions can affect the confidence of foreign investors and increasing tensions can also increase commodity prices.