IMF disagrees with Pakistan over key targets, subsidies ahead of budget
ISLAMABAD: The Finance Ministry said on Monday that the presentation of the Federal Budget 2025-26 has been delayed from June 2 to June 10 due to disagreements with the International Monetary Fund (IMF) over key budgetary figures, including subsidy allocations.
During a session of the Sub-Committee of the National Assembly Standing Committee on Commerce, chaired by Khurshid Ahmed Junejo, Joint Secretary (Corporate Finance) Sajjad Azhar outlined the government's challenges in revising the budget figures.
The Sub-Committee is currently working to resolve the issue of outstanding receivables owed to the Trading Corporation of Pakistan (TCP), which total approximately Rs 317.5 billion. Of this, Rs 93.693 billion is principal, while Rs 223.797 billion is accrued markup.
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'As you know, Pakistan is under the IMF's Extended Fund Facility, which restricts any changes to the allocated funds in the budget,' Azhar told the sub-committee. 'The budget announcement has been delayed by a week because the Finance Ministry's figures are still under reconciliation. The IMF has placed a cap on subsidies,' he added.
Azhar further noted that the IMF has declined to make any changes to the revised budget figures recently presented to the Fund's team.
The Sub-Committee held a detailed discussion on the TCP receivables. Tensions flared during the meeting between Sajjad Azhar and TCP Chairman Syed Rafeo Bashir Shah over the calculation of markup and loans obtained from commercial banks.
Chairman Shah maintained that TCP distributed imported wheat and urea in line with Economic Coordination Committee (ECC) directives, yet payments remain outstanding since 2010.
In response, Azhar stated that the ECC never approved covering the markup costs through the federal government. He added that the Finance Ministry has held five meetings with relevant stakeholders to reconcile the dues. The State Bank of Pakistan (SBP) was also approached to persuade commercial banks to reduce markup rates. However, the SBP clarified that since the agreements are commercial, no relief could be extended.
The National Assembly panel urged the Finance Division to increase subsidy allocations to enable partial payment to TCP.
Azhar informed the committee that the Finance Ministry recently secured commercial loans for Pakistan International Airlines (PIA) without any discounts. Similar arrangements are being considered to manage circular debt, with borrowing pegged at the Karachi Interbank Offered Rate (KIBOR) minus 0.2 percent. A summary on this matter is being submitted to the federal cabinet.
He also mentioned that the Punjab government has committed to paying Rs 26 billion, while the federal government will release an equivalent amount next fiscal year. Additionally, Rs 15 billion will be disbursed to TCP on behalf of the Utility Stores Corporation (USC) and National Fertilizer Marketing Limited (NFML) during the current fiscal year, pending release authorizations from the respective ministries. Another Rs 30 billion will be earmarked in the upcoming budget.
A representative from NFML stated that all dues, including markup, were cleared during 2023-24, and no further payments are pending.
After an in-depth discussion, the panel decided to release the undisputed amount of Rs 90 billion to TCP in the first phase. A mechanism will be developed to address the markup issue in the second phase. It was also decided that TCP will conduct a special audit of its commercial loans to identify any discrepancies.
panel members Shaista Pervaiz Malik and Rana Atif raised various concerns regarding the markup and called for swift resolution of outstanding payments.
Copyright Business Recorder, 2025
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