Pakistan has been requested by the International Monetary Fund (IMF) to take “additional measures” to strengthen the budget and make it in line with the fund’s core objectives.
When asked for her thoughts on the budget for 2022-23, IMF Resident Chief in Pakistan Esther Perez Ruiz responded in this manner.
The IMF official said, “We note the submission of the draft budget to the National Assembly last Friday. Discussions with the authorities continue to obtain more clarity on certain revenue and spending items and allow for a full assessment,” and added, “however, our preliminary estimate is that additional measures will be needed to strengthen the budget and bring it in line with key program objectives.”
The Fund’s staff is ready to continue to assist the authorities in this regard, as well as in the implementation of measures that promote macroeconomic stability more broadly.
The IMF official did not elaborate on the “additional actions” required to restart the delayed $6 billion Extended Fund Facility program (EFF).
Official sources, on the other hand, explained the further steps, stating that the IMF wanted to see a much farther increase in gasoline and diesel prices this week.
The government had already raised POL prices in the domestic market by Rs. 60 per liter before the budget announcement, and another hike was expected this week.
There is still a subsidy on gasoline and diesel, and a partial withdrawal is planned soon in order to reach an agreement with the IMF at the staff level.
The IMF also wants the government to impose the NEPRA-determined power rate hike of Rs. 7.91 per unit, as well as make quarterly fuel adjustments.
The IMF also wants revisions to the projected Personal Income Tax (PIT) to make it more progressive, as the FBR recommended cutting the number of slabs from 12 to 7, while tax rates for salary employees earning up to Rs. 1 million per month were reduced.
The IMF has stated that the Rs. 47 billion tax relief provision is completely unacceptable to them, and the government must make revisions.
Because the government has increased the charge limit from Rs. 30 to Rs. 50 per liter, it is unclear whether the IMF has raised any objections to the Rs. 750 billion petroleum levy prediction.
Last week, Finance Minister Miftah Ismail told this scribe that the government will impose a petroleum duty in the region of Rs. 5 per liter and that the government would not be able to impose a Rs. 50 per liter levy all at once.
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