Pakistan, IMF at odds with over 900 billion rupees fiscal gap: report

Islamabad:

The International Monetary Fund (IMF) and the Pakistani government are in a stalemate over rupees 900 billion, a major stumbling block in reaching a staff-level deal, Geo News reported.

The IMF has calculated a larger gap of about 900 billion rupees, equivalent to 1 percent of gross domestic product (GDP).

IMF is asking to raise the GST rate by 1 percent from 17 to 18 percent or impose 17 percent GST on petroleum, oil and lubricant products (POL), Geo News reported.

Meanwhile, Pakistan disputes the fiscal gap in reaching the primary deficit. Pakistani authorities have asked the IMF to include a reduction stream under the revised Circular Debt Management Plan (CDMP) and reduced the required additional grant amount by 605 billion rupees from the previous target of 687 billion rupees.

Therefore, the fiscal gap was between 400 billion and 450 billion rupees.

In addition, top officials have completely ruled out any possibility of IMF conditions over the signing of Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan to revive the Fund program and said no such talks have taken place with the IMF assessment mission, Geo News reported.

“Differences remain on how to determine the exact fiscal gap between Pakistan and the visiting IMF assessment mission during the technical level talks. Once finalized with the IMF, the additional fiscal measures will be strengthened, which will be revealed Given the lack of agreement on the figure of the fiscal gap, technical-level talks will continue on Monday and then policy-level talks are expected to start from Tuesday,” sources confirmed while speaking with a select few. group of reporters in the background discussions on Saturday.

They said that the government agreed in principle with the IMF to scrap electricity and gas tariff subsidies for the export-oriented sector, as such a payout was completely unacceptable to the lender.

The exporters’ schedule will be reviewed by making major changes to it, the official said, Geo News reported.

The Pakistani authorities admitted that the energy sector had so far proved to be a major stumbling block on the road to smooth sailing.

But the circular debt for the gas sector also remained a bottleneck, reports Geo News.

The expenditure overrun will exceed the overall budget deficit target of 4.9 percent of GDP, which is likely to rise to 6.5 to 7 percent for the current fiscal year.

Meanwhile, the government is ready to levy the flood levy on wealthy segments as well as on imports, impose a 41 percent levy on windfall profits earned by the banking sector, raise Federal Accise Duty (FED) rates on cigarettes, sugary drinks from 13 to 17 percent, increase in withholding tax rates on a real estate transaction, air travel abroad and others.

The IMF estimated that the FBR would face a deficit of 130 billion rupees to meet the target of 7.470 billion rupees, Geo News reported.

Both sides are expected to reach a staff-level agreement by the end of talks on February 9. After that, the IMF Executive Board will likely consider approving the next tranche in March 2023.

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