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The government of Pakistan and the International Monetary Fund (IMF) made progress on the budget measures for 2022-23 late on Tuesday night, but analysts say a big part of the additional steps required to revive the bailout programme remains unclear.

"Discussions between the IMF staff and the authorities on policies to strengthen macroeconomic stability in the coming year continue," IMF Resident Representative in Pakistan Esther Perez Ruiz told Business Recorder. "Important progress has been made over the FY23 budget."

The development is short of a staff-level agreement, and remains contingent on Pakistan meeting additional policy actions to "strengthen macroeconomic stability".

Speaking to Business Recorder, Ismail Iqbal Securities Head of Research Fahad Rauf stated that a large part of the broad agreement between IMF and Pakistan was unclear, and only a few things were confirmed.

“There is a lot of conflicting news about what the IMF wants from Pakistan and only a small part of the conditions is confirmed,” he said. According to him, the global lender has called for revising the tax target upward, he said.

In particular, IMF wants taxes on the salaried income group to rise and hence, some of the tax slabs will be revised.

To recall, Finance Minister Miftah Ismail had also told reporters that total income tax relief worth Rs47 billion would see a "small reduction."

Rauf highlighted that the government would also raise customs duty on a few items as well to prop up tax collection.

“The IMF pointed out that expense growth was underestimated in the budget and Pakistan’s expenses were bound to rise,” he said. “However, the deficit will remain the same because growth in revenue will balance the increase in expenses.”

Moving on to the petroleum development levy (PDL), he added that the market had mixed views on this point.

“Some reports claim that the IMF wants Pakistan to increase PDL while others state that PDL will fall,” he said.

The clarity on the IMF front was also reflected in the KSE-100 Index's movement that briefly rose in the morning before sliding into the negative zone. By the end of the day, the index settled at 42,458.14, a loss of 67.81 points after an initial increase of over 340 points.

Similarly, the rupee too, staged a sharp recovery in the morning before concluding the session with its 9th successive fall.


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