The International Monetary Fund (IMF) has accepted Pakistan’s request and postponed the review of its $6 billion loan programme scheduled for Jan 12, it is learnt.
The review is now likely to take place either on Jan 28 or 31.
The government on Jan 4 laid the controversial Finance (Supplementary) Bill 2021, commonly known as mini budget, before the Senate following its introduction in the National Assembly on Dec 30 along with the State Bank of Pakistan (Amendment) Bill 2021.
The approval of the two bills is necessary to ensure that the sixth review of the country’s $6 billion Extended Fund Facility gets cleared by the IMF’s Executive Board. The government initially aimed to have the two bills passed before the IMF board’s meeting scheduled for Jan 12.
If passed by the parliament, the mini budget will net additional revenues to the tune of Rs343 billion, equal to 0.6 per cent of GDP, mainly by withdrawing sales tax exemptions.
Although Finance Minister Shaukat Tarin dismissed the suggestion that the new tax measures are inflationary in nature, the withdrawal of the exemptions and the increase in sales tax rate on a large number of goods are likely to push up prices going forward.
The legislative move has attracted severe criticism from the opposition in the parliament. The Senate chairman referred the Finance (Supplementary) Bill to the house committee on finance with the directive to finalise recommendations within three days.
It may be noted that officials had said that the IMF had not set a deadline for the review, which was to pave the way for the disbursement of a $1 billion tranche. The official said Pakistan’s review was still on the agenda of the IMF board meeting scheduled for Jan 12 and that the ministry had already dispatched the required documentation. They said the IMF board held meetings regularly and that the country had requested the Washington-based lender to postpone the review.
The finance ministry insiders said that the “government expects the mini budget to receive parliamentary approval — which is one of the prime conditions of the IMF for resumption of the loan programme — before the Executive Board meeting on Jan 28 or 31.”
“The government is quite confident that the IMF board will give its approval to the revival of the loan programme,” they said.
Meanwhile, members of the Senate Standing Committee on Finance were unanimous that the proposed revenue measures would cause a “tsunami of inflation”.
The committee objected to the “unconstitutional” order of the Senate chairman to finalise the consideration of the bill in a short period of time. The committee recalled that 14 working days were required to deliberate on a bill as per the constitution.