Fate of 7th IMF EFF review dependent on FY23 budget composition

ISLAMABAD: The fate of the seventh $6 billion Extended Fund Facility (EFF) review will depend on the composition of budget scheduled to be laid before parliament on 10 June with targets set that would indicate the government’s expenditure and revenue priorities for next fiscal year.

This was revealed by several senior officials of the Ministry of Finance on condition of strict anonymity. However, one official claimed that technical level talks on the budget proposals will commence from Tuesday (today).

Officials further contended that the Doha talks had been inconclusive with respect to projected expenditure for next fiscal year, particularly with respect to subsidies, though the Fund was reportedly satisfied with the Federal Board of Revenue’s (FBR’s) targets and presentation, including the levy of personal income tax and phasing out exemptions next year.

However, the FBR targets do not include petroleum levy (PL), budgeted at Rs 610 billion for 2021-22 (though less than half was realized) nor gas infrastructure development cess budgeted at Rs 130 billion, which is itemised under non-tax revenue receipts.

Background interaction with officials further revealed that primary deficit, budget deficit, a strategic plan for withdrawal of energy subsidies and a provincial surplus agreed and signed by provinces are major areas of interest to the Fund that could bring the programme back on track.

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When Business Recorder asked what directions, if any, were being given by Finance Minister Miftah Ismail, officials said that the budget figures were being shared with London as well as Karachi where a former finance minister was currently resident. However, when this correspondent tried to confirm this at a very senior level this was vehemently denied.

Finance Ministry officials were tight-lipped to a query on the quantum of power sector subsidies next year that would be acceptable to the Fund.

However, they pointed out that power sector has been a problem in terms of subsidies’ projection every year, especially when the country is on a Fund programme, and this situation is likely to prevail in 2022-23 budget.

On condition of anonymity, officials in the finance ministry did not rule out an increase in power tariff before the budget. Finance Minister Miftah Ismail’s fudged a query during his Saturday’s press conference by stating that he had not yet received any summary for power tariff increase.

The revenue target set by Federal Board of Revenue (FBR) is Rs 7,255 billion for next fiscal year which would be achievable by taking new taxation measures of over Rs 300-350 billion – a growth of 18.9 percent compared to the Rs 6100 billion for the outgoing fiscal year.

The envisaged increase would be on the incidence of tax on sectors earning substantial profits including the banking sector, edible oil industry, steel sector, tobacco industry, and beverages in the budget (2022-23).

Copyright Business Recorder, 2022