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ISLAMABAD – The Ministry of Finance (MoF) has once again clarified that talks between Pakistan and International Monetary Fund (IMF) have not failed so far.
“Dialogue with the IMF team is still underway,” said Finance Ministry Spokesperson Muzzammil Aslam, adding that a formal announcement on it will be issued as soon as talks conclude. Talks between Pakistan and the IMF were started on October 13 and were expected to end on October 15 or 16. However, talks have been extended as both sides are yet to reach on any understanding regarding revival of IMF’s loan programme.
Pakistan had already accepted some of the toughest prior conditions of the IMF for the release of next loan tranche. During last week, the government had announced a countrywide uniform increase in base electricity tariff. The government has increased the base power tariff by Rs1.39 per unit. The government had enhanced the power tariff prices in a bid to revive inflows from the international lending agencies including International Monetary Fund (IMF) and the World Bank. Later on the next week, the government had announced record increase of up to Rs12.44 per litre in the prices of petroleum products on fortnightly basis, taking the prices to historic high level.
Officials informed that Pakistan had also assured the IMF for taking additional revenue generation measures in current fiscal year to achieve the annual tax collection. The government is likely to issue Presidential Ordinance to withdraw sales tax exemptions of Rs330 billion. An official of the ministry of finance said that government could eliminate sales tax exemptions, sales tax zero-rating and all kinds of reduced sales tax rates may be subjected to standard rate of 17 percent sales tax. The government would be able to generate Rs330 billion, which would help the government to reach the target. The government had fixed revenue collection target of Rs5,829 billion for year 2021-22.
The IMF, according to the official, has rejected the government’s plan of achieving tax collection target during current fiscal year. The government had assured that tax collection target would be achieved without additional revenue generation measures. The Federal Board of Revenue (FBR) had surpassed the tax collection target by Rs186 billion in the first quarter (July to September) of the current fiscal year. However, IMF noted that tax collection is increasing due to massive surge in imports. Therefore, it has asked the government to present the alternate plan that included withdrawal of tax exemptions worth of Rs330 billion.
Some reports claimed that IMF has imposed conditions that would see an increase in interest rates and fixing the market rate of the dollar. The IMF has also directed the government to expedite the process of privatisation of loss-making entities including Pakistan international Airlines (PIA), Pakistan Steel Mills (PSM) and others.