IMF's Georgieva says tax collection basic issue for Pakistan
Business
Two sides will share policy draft today
WASHINGTON/ISLAMABAD (Reuters/Dunya News/Web Desk) – International Monetary Fund Managing Director Kristalina Georgieva said in an interview with Bloomberg News on Wednesday that she expects an agreement on Pakistan's review with the IMF to come this week.
In Pakistan, the primary issue is tax collection, Georgieva told Bloomberg, adding that the IMF is asking for tax collections to be at least 15 per cent of gross domestic product (GDP).
Georgieva commended Islamabad's efforts, saying it has been sticking to the programme despite all the difficulties.
The statement comes as the IMF’s visiting and the Pakistani authorities completed talks in connection with the first of review of the $3 billion stand-by arrangement, the two sides will prepare a policy draft for future course of action today (Wednesday).
With the expectations that the dialogue will prove to be a success, the IMF delegation is scheduled to leave Islamabad later in the day as the decision about releasing $710 million in second tranche next month would be taken by its executive board.
During the talks, the IMF reportedly expressed its concerns over the government failure to address the circular debt issue – a challenge considered vital to reduce budget deficit – and other matters related to the power and gas sectors, sources said.
At the same time, the IMF is not satisfied with Pakistan’s position on external financing – funds provided by friendly nations and international financial institutions in the shape of loans – which is a prerequisite to meet the financial needs amid insufficient revenue generation.
Moreover, the sources also say that the Washington-based institution also wants Pakistan to revise the fiscal framework which may result in more hikes in power and gas tariffs as the government has failed to expand tax base for an enhanced revenue generation.
On Tuesday, Deputy Chairman Planning Commission Dr Jahanzeb Khan had told reporters that the IMF wasn’t in favour of creating the Special Investment Facilitation Council (SIFC) because the Washington-based institution considered the move favouring a preferred group of investors.
According to Khan, the IMF team questioned the need for establishing SIFC and called for “transparency and accountability”.
However, Caretaker Finance Minister Shamshad Akhtar on Monday said Pakistan had assured the IMF of following austerity and reducing government expenditure to control budget deficit.
She expressed these views in an informal chat with Dunya News after the IMF and the government launched policy-level talks as part of the ongoing first review of the $3 billion stand-by arrangement.
At the same time, Akhtar promised that the government won’t further burden the masses and revenue collection target would stay at Rs9,415 billion – a clear reference to the recent hikes in gas and power tariffs and the IMF’s insistence on expand tax base for collecting more taxes.
The caretaker finance minister said progress was being made in the IMF talks, adding that the world’s top lender had complete confidence in the steps taken by the government and was satisfied with the Benazir Income Support Programme (BISP) and the development spending.
It is not just the government but also the businessmen and investors who are watching the progress made in the ongoing IMF review with a belief that inflation has started easing after reaching its peak and there won’t be any rate hikes in future.
However, there is a broad consensus that the interest rates, which have crippled the economy, aren’t going to slashed to the desired levels soon albeit one may see a rate cut after the next meeting of the State Bank of Pakistan’s Monetary Policy Committee.
Moreover, the government has already hiked the power and gas tariffs, a move meets one of the key IMF demands and addresses the circular debt issue.
At the same time, the investors feel that the privatisation of loss-making state-owned enterprises (SOEs) may gain momentum after years of stagnation, which will help the boosting the share prices of the stocks which are still undervalued when compared with the highs reached in 2017 despite the record-breaking surge being witnessed in the stock market.
