Pakistani Authorities Approached IMF for Further Revision in FBR Revenue Target
The News Reported on Tuesday that Pakistan has shared import compression data with the IMF (International Monetary Fund) and based on the statistics has requested further revision in the FBR revenue target.
The initial target set by IMF for FBR was Rs5.5 trillion, which was revised earlier to Rs5.238 trillion. Imports have declined by approx. $5.5 billion in the first seven months of the current fiscal year. On the basis of this massive decline, Pakistani authorities have asked the IMF to further reduce the FBR target from Rs5.238 trillion to Rs4.8 trillion.
IMF insists that Pakistan must meet its already revised target of Rs5.238 trillion for ensuring effective financial management of the country. Whereas the Pakistani contingent believes such a significant decline in imports should be included in the calculations to make the FBR target realistic.
— Sach Pakistan (@Sach__Pakistan) February 25, 2020
According to The News, two teleconferences were held between the IMF and Pakistani team last week but no agreement has been reached yet. Further talks between both parties are expected to be held in the next couple of weeks in order to reach a consensus.
There are few stumbling blocks along the way like the hiking tariff of energy utilities and the timely rollover of Chinese loans.
For the power tariff, the PTI led regime has finalized a freezing power tariff strategy that will keep the tariff unchanged till June 2020. While the controversial decision surrounding the inclusion of RLNG arrears in the gas tariffs has not been decided yet.
It is not clear yet that who will bear the burden of these RLNG arrears whether it will be the consumers or the government through subsidies. These arrears are to the tune of Rs19 billion and can rise up to Rs50 billion if you add both existing and upcoming ones.
In order to reach a staff-level agreement with the IMF, the Pakistani authorities must ensure the timely rollover of the Chinese loan. As any delay in reaching an agreement will push back the release of the third tranche worth $452 million from the IMF to Pakistan.
The Springs Meeting of Breton Wood Institutions WBI’s which include the World Bank and IMF which will be held in Washington DC from April 13 to 19, 2020.
Presents an opportunity to the Pakistani contingent which comprises of Pakistan’s Adviser to PM on Finance Dr. Abdul Hafeez Shaikh and Governor SBP Dr. Reza Baqir to move the case forward if the differences between IMF and Pakistani authorities are not sorted out in the coming 6 weeks.
Failure to reach an agreement will make it even harder for the Pakistani authorities to fulfill the IMF commitment. As the second and third reviews will be clubbed under $6 billion in the Extended Fund Facility of the IMF program.
Therefore, the best choice available for the Pakistani authorities is to find out the middle ground and try to reach an agreement with the IMF by the second week of March at most.
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