Pakistan, IMF mission having trouble agreeing on fiscal adjustment measures
Business
IMF insists to remove power subsidy; both parties had different budget imbalance estimates, Reuters
(Web Desk) - In negotiations to release crucial money required for the faltering South Asian economy, Pakistan and the visiting International Monetary Fund (IMF) mission are reportedly having trouble agreeing on fiscal adjustment measures, according to reports on Monday.
To resolve the disagreements over fiscal policies that have prevented the delivery of more than $1 billion from the $6.5 billion rescue package negotiated in 2019 the team has been in Islamabad since January 31.
The $350 billion economy which is experiencing a balance of payments crisis and has foreign exchange reserves that can only cover fewer than three weeks of imports depends on the IMF funds.
During two days of discussions IMF has insisted that the government should remove its power subsidies. Two finance ministry sources with knowledge of the discussions told Reuters that the two parties had different estimates of the budget imbalance.
The primary deficit is 0.45 percent or around Rs450 billion ($1.64 billion) as opposed to the IMF's estimate of 0.9 percent of GDP or over Rs840 billion ($3.06 billion). The officials requested anonymity since the discussions were private.
One of them stated, "There is a very apparent discrepancy in the statistics.” They claimed Islamabad anticipates an agreement by February 9. BMP promises to buck IMF demand to raise GST to 18%
The fiscal deficit was projected to be 4.9 percent of GDP and the primacy deficit to be 0.2 percent of GDP in Pakistan's 2022–23 budget released in June.
If the problems are overcome Pakistan will submit a financial bill to the parliament that would reduce spending and development funding while raising money through measures such as a one-time flood tax on expensive imports, a windfall tax on banks, and charges on cigarettes and fizzy beverages.
