Latest news with #MemorandumofEconomicandFinancialPolicies
Express Tribune
23-03-2025
- Business
- Express Tribune
IMF proposes Rs15tr tax revenue target
In the first half of FY25, the economic slowdown, exchange rate stability, lower-than-expected inflation, and sluggish LSM recovery led to a revenue loss of Rs338 billion. photo: file The International Monetary Fund (IMF) has proposed setting a tax revenue target of over Rs15 trillion in the federal budget for the upcoming fiscal year 2024-25. However, the finalization of this target will take place following detailed discussions in ongoing virtual negotiations between the government and the IMF official which are expected to conclude soon. According to sources in the Ministry of Finance, the IMF is likely to introduce new conditions in the Memorandum of Economic and Financial Policies (MEFP) as part of the staff-level agreement for the release of the next $1 billion tranche to Pakistan. However, in response to a request from the Federal Board of Revenue (FBR), the IMF has agreed in principle to grant partial relief by reducing the withholding tax rate on property purchases by 2% starting in April 2025. The withholding tax rate for property sellers, however, will remain unchanged. The sources said Pakistan and the IMF are engaged in virtual negotiations, during which further stringent conditions for the $1 billion tranche may be imposed and new financial targets may also be set for Pakistan. The government is expected to face financial structural benchmarks in the new fiscal year including new revenue collection targets to increase tax income. These targets are likely to be finalized through ongoing virtual discussions. The IMF and Pakistani officials have also discussed measures to curb tax evasion. The proposed tax revenue target for the next budget exceeds Rs15 trillion, with discussions underway to raise the tax-to-GDP ratio to 13%. The government aims to collect Rs2.745 trillion in non-tax revenue in the upcoming fiscal year. Economic growth is projected to exceed 4% in the next fiscal year, according to ministry sources. During the recent virtual meeting, the IMF agreed to lower the federal excise duty rate on property buyers, though the tax on sellers will remain unchanged. At FBR's request, the IMF has agreed to reduce the tax collection target for March 2025 by Rs60 billion. Regarding property taxation, the FBR had requested a reduction in withholding tax rates for both buyers and sellers under Sections 236C and 236K. However, the IMF has only agreed to lower the tax rate for buyers by 2% under Section 236K. Moreover, the IMF has approved the collection of Rs1.257 trillion from banks to address the issue of circular debt in the power sector.
Express Tribune
22-03-2025
- Business
- Express Tribune
IMF approves tax cut on property purchases in Pakistan
Listen to article The International Monetary Fund (IMF) has agreed in principle to a partial reduction in the withholding tax rate on property purchases, following a request from the Federal Board of Revenue (FBR). The new rate, which will be reduced by two percent, is set to come into effect in April 2025. However, the withholding tax rate imposed on property sellers will remain unchanged. According to sources, a recent virtual meeting between Pakistani officials and the IMF concluded with an agreement to lower the federal excise duty rate for property buyers. However, the tax on property sellers will still be collected at the existing rate. In addition, the IMF has also agreed to a reduction of Rs60 billion in the tax revenue target for March 2025, as requested by the FBR. The sources indicated that this development would pave the way for consensus on the Memorandum of Economic and Financial Policies (MEFP) and a staff-level agreement, which is expected to be finalized next week. Regarding the tax reduction on property transactions, FBR had previously requested the IMF to lower withholding tax rates for both buyers and sellers under Sections 236C and 236. However, the IMF has only agreed to reduce the tax rate for buyers under Section 236 by two percent. Additionally, the IMF has permitted the government to raise PKR 1,257 billion from banks to address the circular debt issue in the electricity sector.
Express Tribune
21-03-2025
- Business
- Express Tribune
FinMin Aurangzeb optimistic about IMF deal breakthrough
Listen to article Finance Minister Muhammad Aurangzeb has expressed optimism about the ongoing negotiations with the International Monetary Fund (IMF), stating that talks are in their final stages and there are no significant obstacles remaining. Speaking to the media on Friday, the minister confirmed that Pakistan is on track to meet the IMF's economic targets and reassured that the discussions will soon conclude positively. Aurangzeb emphasised Pakistan's commitment to fiscal discipline, highlighting the government's adherence to the financial framework agreed upon with the IMF. The talks are focused on securing the next tranche of funding, which is crucial for Pakistan's economic recovery. The IMF Mission Chief to Pakistan, Nathan Porter, also confirmed last week that significant progress had been made toward reaching a Staff-Level Agreement (SLA) regarding the first review of Pakistan's $7 billion loan programme. The success of these talks will pave the way for Pakistan to receive about $1 billion as part of the second instalment of the loan. Additionally, Aurangzeb addressed climate change challenges, stressing the urgent need for structured climate financing to combat environmental risks. He acknowledged the increasing threats posed by climate change, including the rapid melting of glaciers and economic disruptions caused by environmental changes, particularly in Lahore. The finance minister also highlighted international pledges for flood rehabilitation, although the country has struggled to fully utilise these resources due to implementation challenges. Earlier on Thursday, the central bank governor, Jameel Ahmad, said that there was no hurdle from the State Bank of Pakistan (SBP)'s side in reaching a staff-level agreement with the International Monetary Fund (IMF), and any outstanding issues might be related to the federal government. While talking to the media after a meeting of the Public Accounts Committee (PAC), the governor hoped that the staff-level agreement would be reached very soon with the IMF. However, he did not provide a firm date for the deal, which has been overdue since March 14. The PAC meeting also revealed that the federal government was about to give "emperor-like powers" to Federal Finance Minister Muhammad Aurangzeb to approve up to five special honoraria for employees and officers of various government departments. "There is no issue pending with us, and any outstanding issue might be on the part of the federal government," said Jameel Ahmad while responding to a question about the timing of the staff-level agreement with the IMF. The governor did not specify any particular issue but stated that finalising matters with ministries and divisions takes time. Pakistan and the IMF held talks from March 3 to 14, but both sides could not reach a staff-level agreement due to delays in finalising the Memorandum of Economic and Financial Policies (MEFP). After the mission returned to Washington, the Ministry of Finance held at least two virtual sessions with the IMF in the presence of other stakeholders. The IMF and Pakistan are in the process of finalising the MEFP in the areas of trade and taxes, along with fiscal and circular debt numbers. The federal authorities remain hopeful that the agreement will be reached soon. According to the IMF Board's schedule, the first programme review and the end-December 2024 performance and continued criteria must be completed by March 15.
Express Tribune
20-03-2025
- Business
- Express Tribune
'No hurdles in IMF agreement'
Listen to article The central bank governor, Jameel Ahmad, said on Thursday that there was no hurdle from the State Bank of Pakistan (SBP)'s side in reaching a staff-level agreement with the International Monetary Fund (IMF), and any outstanding issues might be related to the federal government. While talking to the media after a meeting of the Public Accounts Committee (PAC), the governor hoped that the staff-level agreement would be reached very soon with the IMF. However, he did not provide a firm date for the deal, which has been overdue since March 14. The PAC meeting also revealed that the federal government was about to give "emperor-like powers" to Federal Finance Minister Muhammad Aurangzeb to approve up to five special honoraria for employees and officers of various government departments. "There is no issue pending with us, and any outstanding issue might be on the part of the federal government," said Jameel Ahmad while responding to a question about the timing of the staff-level agreement with the IMF. The governor did not specify any particular issue but stated that finalising matters with ministries and divisions takes time. Pakistan and the IMF held talks from March 3 to 14, but both sides could not reach a staff-level agreement due to delays in finalising the Memorandum of Economic and Financial Policies (MEFP). After the mission returned to Washington, the Ministry of Finance held at least two virtual sessions with the IMF in the presence of other stakeholders. The IMF and Pakistan are in the process of finalising the MEFP in the areas of trade and taxes, along with fiscal and circular debt numbers. The federal authorities remain hopeful that the agreement will be reached soon. According to the IMF Board's schedule, the first programme review and the end-December 2024 performance and continued criteria must be completed by March 15. "The IMF and Pakistani authorities made significant progress toward reaching a staff-level agreement on the first review under the 37-month Extended Arrangement under the Extended Fund Facility (EFF)," said Nathan Porter, the IMF Mission Chief, after the talks last week. The smooth continuation of the programme is critical to ensuring uninterrupted rollovers of foreign debts by four bilateral creditors: Saudi Arabia, the United Arab Emirates, China, and Kuwait. The SBP governor stated that the IMF had "substantially reduced" the current account deficit projection for the current fiscal year during the recent review talks. At the time of finalising the $7 billion deal last year, the IMF had estimated the current account deficit at $3.6 billion or 0.9% of GDP for the current fiscal year. The governor neither confirmed nor denied whether the IMF has now projected the current account deficit target at around $400 million or 0.3% of GDP for this fiscal year. He said that the next fiscal year's target has not yet been finalised. During the talks, the IMF wanted to keep the current account deficit high, assuming that an increase in foreign exchange reserves would help build external sector buffers. The central bank's reserves remained flat at $11.1 billion by the end of last week, barely enough to finance a little over two months of imports. When asked, the governor said that the IMF is also revising inflation and economic growth projections. He noted that the central bank expects economic growth to remain around 3% during the current fiscal year. He highlighted the significant growth in foreign remittances and expressed hope that they would remain above $36 billion this fiscal year. PAC proceedings Headed by PTI's Junaid Akbar, the PAC discussed audit objections related to the finance ministry and expressed dissatisfaction over the nation's financial management. PAC members repeatedly pointed out poor budgeting and weak fiscal discipline by the Ministry of Finance during the fiscal year 2022-23. On an audit objection regarding the payment of Rs241 million in honoraria to finance ministry employees without any policy, Finance Secretary Imdadullah Bosal disclosed that a new honoraria policy would soon be approved by the federal cabinet. However, the policy's framework indicated that discretionary powers over honoraria distribution would continue. Bosal said that the Economic Coordination Committee (ECC) of the Cabinet had approved the honoraria policy in June 2022, but the federal cabinet had not yet granted approval. According to the proposed policy, the federal secretary can award one month's salary as a bonus to all employees and an additional salary to 25% of the total employees. Two special honoraria can also be granted. However, Bosal stated that the ECC chairman, who is also the finance minister, would have the authority to grant up to five months' salaries as "special honoraria." Committee members criticised these discretionary rewards, comparing them to the lavish gifts given by Mughal emperors. They argued that such powers should not be included in the policy. Bosal noted that 60 departments receive budgeted honoraria, not just the finance ministry.
Express Tribune
18-03-2025
- Business
- Express Tribune
PSX bullish on debt reduction hopes
Listen to article Pakistan Stock Exchange (PSX) on Tuesday maintained its bullish momentum, driven by strong investor interest in the wake of unfolding economic developments. Analysts mentioned that investors responded positively to a 97% month-on-month drop in Pakistan's current account deficit, coupled with speculation surrounding the potential resolution of the circular debt issue. The momentum was supported by a strengthening rupee, rising international crude oil prices and a global equity rally. The index advanced to the intra-day high of 1,002 points, before settling at 117,001, up 801 points from the previous day. According to Ahsan Mehanti of Arif Habib Corp, stocks closed bullish as investors weighed a 97% month-on-month drop in the current account deficit that stood at $12 million for February 2025 along with speculation about potential resolution to the circular debt crisis. A strong rupee, surging global crude oil prices and a bull-run in global equities played the role of catalysts in bullish close at the PSX, he added. At the end of trading, the benchmark KSE-100 index recorded an increase of 801.50 points, or 0.69%, and settled at 117,001.09. In its review, Topline Securities stated that bulls dominated Tuesday's trading session, propelling the benchmark index to the intra-day high of 1,002 points. It eventually settled at 117,001, up 801 points. The positive sentiment was largely driven by encouraging economic developments, it said. According to news reports, the International Monetary Fund (IMF) has permitted Pakistan to borrow Rs1.25 trillion ($4.5 billion) from domestic banks to help manage the Rs2.4 trillion circular debt without increasing the public debt level. Topline added that investor confidence was further lifted as the IMF shared a draft of the Memorandum of Economic and Financial Policies (MEFP) with Pakistani authorities, marking progress towards a staff-level agreement under the $7 billion Extended Fund Facility. This reinforced hopes for sustained financial support and economic stability. The index gains were primarily fuelled by Fauji Fertiliser Company, Engro Holdings, Hub Power, TRG Pakistan and Lucky Cement, which collectively added 541 points, it said. Arif Habib Limited (AHL) remarked that the KSE-100 index unlocked the 117,000-point level, with a further upside momentum. Some 64 shares rose while 32 fell, with Fauji Fertiliser Company (+1.43%), Hub Power (+2.29%) and TRG Pakistan (+10%) contributing the most to the index gains. On the flip side, Mari Petroleum (-2.94%), UBL (-0.32%) and Fatima Fertiliser (-2.18%) were the biggest drags, it said. AHL also pointed out that the IMF had authorised Pakistan to borrow Rs1.25 trillion ($4.5 billion) from local commercial banks to reduce its circular debt. "The indices continue to show a bullish price structure and are approaching January's all-time highs, which should be exceeded before profit-taking is considered," it concluded. Ali Najib of Insight Securities commented that media reports about borrowing from banks to settle the circular debt fuelled a rally in the exploration & production and oil marketing companies' sectors. It boosted stocks such as PSO, Oil and Gas Development Company, Pakistan Petroleum, Sui Northern Gas Pipelines, Sui Southern Gas Company and Mari Petroleum, which contributed 161 points to the index. Additionally, strong performances from Engro Holdings, Fauji Fertiliser Company, Hub Power and TRG Pakistan further lifted the market, adding 479 points, he said. Overall trading volumes decreased to 449.5 million shares compared with Monday's tally of 507.5 million. Shares of 447 companies were traded. Of these, 206 stocks closed higher, 180 fell and 61 remained unchanged. The value of shares traded during the day was Rs29.2 billion. Pakistan International Bulk Terminal was the volume leader with trading in 59.1 million shares, gaining Rs0.48 to close at Rs10.66. It was followed by The Bank of Punjab with 36.5 million shares, gaining Rs0.15 to close at Rs11.82 and Fauji Cement with 24.99 million shares, gaining Rs0.31 to close at Rs46.38. During the day, foreign investors sold shares worth Rs158.8 million, the NCCPL reported.
