Budget FY23: Understanding with IMF may lead to revival of EFF

KARACHI: In a welcoming breakthrough, Pakistan and IMF reached an understanding on the federal budget FY23 which might lead to revival of the extended fund facility (EFF) after authorities committed to generate Rs 436 billion in more taxes, largely by increasing petroleum levy up to Rs50/litre, experts said.

The government of Pakistan had estimated total collection under PDL to be around Rs 750 billion, which looked unlikely at the time. However, with oil falling in the international market and PDL cap revised to Rs50/litre from Rs30/litre earlier, the total collection under PDL for FY23 was likely to improve, they added.

In the meantime, the IMF team will likely finalise monetary targets with the central bank over the next couple of days whereas the authorities will be working on revising the tax settings announced in the budget and getting the finance bill approved from the parliament.

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With the tax collection target revised upwards by Rs 436 billion (six percent), GoP has announced additional tax measure to achieve the new target. Other than the PDL targets discussed earlier, the GoP also agreed to impose one percent poverty tax on firms earning Rs 150 million, two percent on those earning more than Rs 200 million, three percent on over Rs 250 million and four percent on Rs 300 million and above. Originally, the government had set a two-percent poverty tax only on those earning Rs 300 million and above. Based on the new collection and expenditure targets, the country will now be expected to deliver primary budget surplus of Rs 152 billion (two percent of GDP).

Copyright Business Recorder, 2022