Latest news with #Rs2.414
Express Tribune
22-05-2025
- Business
- Express Tribune
PM says Pakistan on growth path as IMF notes reform success
Listen to article Prime Minister Shehbaz Sharif on Thursday reaffirmed his government's resolve to accelerate institutional reforms and consolidate macroeconomic stability, saying Pakistan was now transitioning from recovery to sustained growth. 'With the grace of Allah, Pakistan is now moving from economic stability toward sustainable growth,' Shehbaz Sharif said during a high-level meeting with a delegation from International Monetary Fund (IMF) led by Jihad Azour at the PM's Office. He emphasised that the government's top priority was not only to sustain macroeconomic gains but also to expedite comprehensive institutional reforms, crucial for long-term resilience. Discussions during the meeting centred on the implementation of Pakistan's current International Monetary Fund (IMF) programme. Both sides expressed satisfaction over progress made and the positive impact of ongoing reforms. The IMF delegation welcomed the reforms undertaken by Islamabad and assured continued support for Pakistan's economic stabilisation and inclusive growth agenda. The meeting was also attended by key cabinet members including Federal Ministers Ahsan, Iqbal Cheema and Muhammad Aurangzeb, Secretary Finance Imdadullah Bosal, FBR Chairman Rashid Mehmood Langrial, and senior officials. IMF's regional director, Jihad Azour, is visiting Pakistan this week in the middle of negotiations for approval of the new budget, as both sides are taking time to converge on key issues of increasing taxes and rationalising expenses. Government sources told The Express Tribune that Jihad Azour, the IMF's Director for the Middle East and Central Asia, is visiting Pakistan 10 days after the approval of the second loan tranche of the $7 billion programme, despite opposition from India. Azour's visit is a testimony to smooth relations between the lender and the borrower, despite New Delhi's negative campaign. Both the Ministry of Finance and the IMF resident representative remained tight-lipped about the purpose of the visit at a time when the IMF staff is already in Pakistan to reach an agreement on the new budget for fiscal year 2025-26. One senior government functionary said the government would take up some outstanding budget-related issues with the IMF director, particularly regarding major spending items. The IMF has imposed a new condition on Pakistan that the government must secure parliamentary approval of the new budget in line with the IMF staff agreement to meet programme targets. This leaves little space for the government to implement its own agenda, although PM Sharif wants to provide relief to the salaried class. The sources said the tax target, defence spending, and some grant-related issues were being discussed. The federal government has decided to allocate nearly Rs2.504 trillion for defence spending in the next fiscal year, which is 18% higher than this year's allocation. However, the IMF's staff-level report released on Saturday showed defence spending at Rs2.414 trillion, an increase of 12%. Some grants and subsidy allocations have also not yet been finalised. The Federal Board of Revenue (FBR) on Monday presented the taxation proposals for the next fiscal year to the prime minister. The PM was also briefed that the FBR's tax target may be around Rs14.07 trillion, which is roughly Rs240 billion less than the earlier mutually agreed target between the IMF and the government for fiscal year 2025-26, they added. However, there is a possibility that the government may substantially increase petroleum levy rates in the Finance Bill 2025. The IMF has projected petroleum levy collection at over Rs1.3 trillion for the next fiscal year, which could become the single largest non-tax revenue source if the government starts charging Rs100 per litre levy on petrol and diesel. The current rate is Rs78 per litre.
Express Tribune
20-05-2025
- Business
- Express Tribune
IMF official visits amid budget talks
Listen to article The International Monetary Fund (IMF)'s regional director, Jihad Azour, is visiting Pakistan this week in the middle of negotiations for approval of the new budget, as both sides are taking time to converge on key issues of increasing taxes and rationalising expenses. Government sources told The Express Tribune that Jihad Azour, the IMF's Director for the Middle East and Central Asia, would also meet Prime Minister Shehbaz Sharif during his visit this week. Azour will also hold discussions with Finance Minister Muhammad Aurangzeb. The regional director is visiting Pakistan 10 days after the approval of the second loan tranche of the $7 billion programme, despite opposition from India. Azour's visit is a testimony to smooth relations between the lender and the borrower, despite New Delhi's negative campaign. Both the Ministry of Finance and the IMF resident representative remained tight-lipped about the purpose of the visit at a time when the IMF staff is already in Pakistan to reach an agreement on the new budget for fiscal year 2025-26. One senior government functionary said the government would take up some outstanding budget-related issues with the IMF director, particularly regarding major spending items. The IMF has imposed a new condition on Pakistan that the government must secure parliamentary approval of the new budget in line with the IMF staff agreement to meet programme targets. This leaves little space for the government to implement its own agenda, although PM Sharif wants to provide relief to the salaried class. The sources said the tax target, defence spending, and some grant-related issues were being discussed. The federal government has decided to allocate nearly Rs2.504 trillion for defence spending in the next fiscal year, which is 18% higher than this year's allocation. However, the IMF's staff-level report released on Saturday showed defence spending at Rs2.414 trillion, an increase of 12%. Some grants and subsidy allocations have also not yet been finalised. The Federal Board of Revenue (FBR) on Monday presented the taxation proposals for the next fiscal year to the prime minister. The PM was also briefed that the FBR's tax target may be around Rs14.07 trillion, which is roughly Rs240 billion less than the earlier mutually agreed target between the IMF and the government for fiscal year 2025-26, they added. However, there is a possibility that the government may substantially increase petroleum levy rates in the Finance Bill 2025. The IMF has projected petroleum levy collection at over Rs1.3 trillion for the next fiscal year, which could become the single largest non-tax revenue source if the government starts charging Rs100 per litre levy on petrol and diesel. The current rate is Rs78 per litre. The finance ministry will have to find space to adjust the Rs240 billion reduction in the earlier agreed target if the petroleum levy is not immediately increased to Rs100 per litre in the budget. For the outgoing fiscal year, the FBR's tax target has further dropped to Rs12.16 trillion after economic growth remained below the government's conservative estimates. The sources said the PM termed the proposed relief in income tax for the salaried class and the cut in super tax rates as insufficient. He directed tax authorities to provide significant respite to salaried individuals in consultation with the IMF. The sources said the PM stated in the meeting that providing relief to the salaried class was his top priority. Salaried individuals paid a whopping Rs437 billion in taxes in just 10 months of this fiscal year, which was Rs150 billion higher than the previous record. The FBR's claims before the prime minister and the IMF that it would compensate for the shortfall in taxes through enforcement measures and by settling litigation cases have proven incorrect. This has created a trust issue between the IMF and the FBR, said the sources. In addition to the standard 29% income tax from the corporate sector, the government also charges a 10% super tax, which might be reduced in phases. The FBR's single biggest failure was its inability to collect the IMF-set target of Rs36.7 billion from traders in nine months under the Tajir Dost Scheme. The IMF report revealed that collections were less than Rs4 million during the first half. For the next fiscal year, the IMF has dropped the Tajir Dost Scheme and proposed a new target, which may shift the focus away from retailers. The IMF and the government have agreed to collect a cumulative Rs531 billion in taxes from retailers in the next fiscal year, including other applicable taxes.
Express Tribune
18-05-2025
- Business
- Express Tribune
IMF slaps 11 new conditions on Pakistan
Listen to article The International Monetary Fund (IMF) has slapped 11 new conditions on Pakistan, including approval of a new Rs17.6 trillion worth budget, increasing debt servicing surcharge on electricity bills and lifting restrictions on the import of more than three years old used cars. The Staff Level report, which the IMF released on Saturday, also said that "rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten risks to the fiscal, external and reform goals of the programme". The report further stated that tensions between Pakistan and India have risen significantly over the past two weeks but so far the market reaction has been modest with the stock market retaining most of its recent gains and spreads widening moderately. The IMF has shown the defense budget for the next fiscal year at Rs2.414 trillion, which is higher by Rs252 billion or 12%. Compared to the IMF's projection, the government has indicated allocating over Rs2.5 trillion or 18% higher budget after India's naked aggression. The report revealed that the IMF has slapped 11 more conditions on Pakistan for the sake of just $7 billion lending, taking the total conditions to 50. It has imposed a new condition of securing "parliamentary approval of the fiscal year 2026 budget in line with the IMF staff agreement to meet programme targets by end-June 2025". The IMF has shown the total size of the federal budget at Rs17.6 trillion, including Rs1.07 trillion for the development spending. The Express Tribune had reported a few days ago that the government would present over Rs17.5 trillion budget. The IMF has shown interest spending at Rs8.7 trillion, the primary budget surplus at Rs2.1 trillion and the overall deficit at Rs6.6 trillion. A new condition has also been imposed on the provinces where the four federating units will implement the new Agriculture Income Tax laws through a comprehensive plan, including the establishment of an operational platform for processing returns, taxpayer identification and registration, a communication campaign, and a compliance improvement plan. The deadline for the provinces is June this year. According to the third new condition, the government will publish a governance action plan based on the recommendations of the Governance Diagnostic Assessment by the IMF. The purpose of the report is to publicly identify reform measures to address critical governance vulnerabilities. The fourth new condition states that the government will give annual inflation adjustment of the unconditional cash transfer programme to maintain people real purchasing power Another new condition states that the government will prepare and publish a plan outlining the government's post-2027 financial sector strategy, outlining the institutional and regulatory environment from 2028 onwards. In the energy sector, four new conditions have been introduced. The government will issue notifications of the annual electricity tariff rebasing by July 1st of this year to maintain energy tariffs at cost recovery levels. It will also issue notification of the semi-annual gas tariff adjustment to maintain energy tariffs at cost recovery levels by February 15, 2026, according to the report. Parliament will also adopt legislation to make captive power levy ordinance permanent by the end of this month, according to the IMF. The government has increased the cost for the industries to force them to shift to the national electricity grid. Parliament will also adopt legislation to remove the maximum Rs3.21 per unit cap on the debt service surcharge, which is tantamount to punishing honest electricity consumers to pay for the inefficiency of the power sector. The IMF and the World Bank dictated that wrong energy policies are causing the accumulation of the circular debt in addition to the government's bad governance. The deadline to remove the cap is the end of June, according to the report. The IMF has also imposed a condition that Pakistan will prepare a plan based on the assessment conducted to fully phase out all incentives in relation to Special Technology Zones and other industrial parks and zones by 2035. The report has to be prepared by the end of this year. In a consumer-friendly condition, the IMF has asked Pakistan to submit to the Parliament all required legislation for lifting all quantitative restrictions on the commercial importation of used motor vehicles (initially only for vehicles less than five years old by end of July. Currently only up to three years old cars can be imported and there are many non-tariff barriers to discourage the import. The purpose of lifting these restrictions is liberalizing trade and increasing vehicle affordability, said the IMF. In addition to imposing new conditions, the IMF has also made adjustments in the earlier conditions. Programme Implementation The IMF has extended the deadlines of four conditions whose implementation had been delayed. The lender said that the government met all seven quantitative performance criteria for end-December 2024. These were floors on net international reserves of the SBP; targeted cash transfer spending; the number of new tax returns from new filers, the ceilings on net domestic assets of the SBP; the SBP's FX swaps; the general government primary budget deficit; and government guarantees. The majority of indicative targets were met at end-December, including the ceilings on the aggregate provincial primary budget deficit; net accumulation of tax refund arrears; and power sector payment arrears; the floors on revenues collected by provincial revenue authorities; and the weighted average maturity of local currency debt securities. However, the conditions on the government health and education spending; net tax revenues collected by the FBR; and net tax revenues collected from retailers under the Tajir Dost scheme were missed, said the IMF. The respective governments also met nine structural benchmarks including on approval of a National Fiscal Pact, improving safeguards for monetary policy operations and approval of amendments to bank resolution and deposit legislation. But the structural benchmark on provincial Agricultural Income Tax legislation was not met at the end-October, but this legislation was subsequently passed in February 2025. Another two structural benchmarks were missed due to delays in passing amendments to the Civil Servants and Sovereign Wealth Fund (SWF) Acts. Two SBs relating to resolving undercapitalized banks and to captive power producers were missed, but subsequent policy actions are expected to accomplish the underlying objectives, said the IMF.
