Talks between Pakistan and the global donor agency International Monetary Fund (IMF) are in an impasse over several “contentious” issues, confided Ministry of Finance sources in TheCorrespondent on Tuesday.
They said with only two days left in the presentation of the budget 2021-22 before the National Assembly, the IMF did not agree on budget matters.
The talks, being held under the sixth review of the $6 billion three-year bailout programme, are expected to conclude on Thursday, said the sources.
There is a deadlock over the issues of circular debt and an increase in the electricity and gas tariff, Ministry of Finance sources added.
Steps are being taken to reduce the circular debt, the ministry told the IMF.
The IMF demands an immediate increase in the electricity and gas prices and the ministry negotiators do not agree to it, they continued.
Sources said that the ministry has assured the IMF that “we will achieve the tax target without raising taxes.”
The ministry negotiators have told the IMF that “we want to increase tax collections under our own procedures,” the sources maintained.
The IMF demands to generate Rs200 billion through new or raise in existing taxes to meet the revenue target.
The sources said that the IMF has refused to accept proposals on real estate as the Pakistan government is considering tax rebate for the sector.
Tax exemptions being given to various sectors is another point of contention between Pakistan and the IMF, sources said.
Meanwhile, the Ministry of Energy sources said the government will try to get the National Electric Power Regulatory Authority (Nepra) law approved from the National Assembly this week to remove a major hurdle in talks.
In order to qualify for the loan tranche of $500 million, the government had promulgated a presidential ordinance in March which will lapse next month.
Under the agreement with the IMF, the government was required to get the Nepra Act passed by the parliament in March. After the promulgation of the ordinance, the Nepra has got the powers to automatic ‘quarterly tariff adjustments’ (QTAs) and the government also got back the authority to levy surcharges on consumers.
The ordinance has given powers to the government to impose a new surcharge equal to 10 percent of the electricity revenue requirements or Rs1.40 per unit, which the IMF now wants to be permanently covered through an act of the parliament. The life of an ordinance is only four months, which can be extended further for another four months, only.
Pakistan and the IMF have not yet agreed on the external financing needs for the next financial year. The IMF has projected $25 billion gross financing needs for the next fiscal year in its last report, which it now sees increasing further due to the government’s plan to achieve a 5 percent economic growth rate.
Special Assistant to Prime Minister on Revenue Dr Waqar Masood Khan had told a parliamentary committee that next year’s overall budget deficit target was 6.3 percent of GDP on back of anticipated savings of Rs570 billion by the provinces. However, the parliamentarians had termed these projections unrealistic due to what they called unrealistic FBR targets.