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The IMF review is in the final stage. Yet not everything is final. There is nothing new or out of the blue which is delaying this review. The Fund is asking for measures (and reforms) which were agreed in March 2021. And are broadly in line with the programme signed in 2019. More the government delay it, difficult would it be to instill those reforms.

The review can be completed within days, or it can linger on. The chances of completion are high. Finance ministry is confident on IMF’s nod. Pakistan economic team has submitted the documents on taxation – mainly on GST harmonization and removing exemptions, and on the legal way of proceeding with the SBP Act. Expert teams at the IMF side are reviewing it. If they agree to what Pakistan authorities have submitted, expect a press release soon – to be followed by board approval. Else, the process may go through another iteration.

On taxation, in this progarmme three types of reforms were broadly agreed with. One is the corporate tax exemptions, other is GST reforms, and the third area is of personal income tax. The first one is already (mostly) done in the previous reviews. Now its GST’s turn. There are lots of gaps in the GST. Some cases have exemptions while in many other cases there are varying rates – harmonization is required to make the taxation system transparent. Some bold steps were taken at the start of the programme – such as removal of zero rating of exporting sectors. The crocodile tears were shed by textile boys. Even now they are pushing to revert the steps. Some more similar steps are required. However, IMF is not against lower or no GST on essential items – what the Fund may ask is rational basis of defining something essential.

Anyhow, the proposed alterations in taxation (money bill or mini budget) – shall be passed before the IMF board meeting. The revised draft is submitted by the MoF and currently being reviewed by the IMF’s technical team. Let’s hope, there would be an agreement soon. The next in line would be exemptions or issues within personal income tax – expect that in the next review.

The second issue is on the SBP autonomy bill. The proposed bill was approved by the federal cabinet – before Shaukat Tarin assumed the finance ministry. There was lot of hue and cry in the media on that bill and misinformation and conspiracy theories were spread. The whole objective of autonomy is to ensure price stability which has eluded us in the past few decades due to repeated exercise of running concessionary monetary and fiscal policies with overvalued exchange rate.

The proposed bill cleared by the cabinet is required to have parliamentary approval process. It can be altered without disturbing the fundamentals of independence. Legal options exist. The vibes are that there is no ownership from the government side on this bill. No one in Islamabad is championing it. Nonetheless, there is something submitted by the government on that front. IMF team is reviewing it.

Once these two – taxation (mainly GST) and SBP Act matters are settled, this review shall be complete. The next in line have more of asking. One is treasury single account, other is personal income tax exemptions and the third one is SOEs law. Government should continue these much-needed reforms under the umbrella of the IMF, as this can counter political patronage of rent seekers. Let’s see how the government balances it.


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