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Pakistan

Govt to impose Rs170bn in additional taxes, MEFP shared with Pakistan: Dar

  • Finance minister says power sector reforms, minimising untargeted subsidy key priorities for IMF programme revival
Published February 10, 2023

Federal Minister for Finance and Revenue Ishaq Dar on Friday said that the government would impose additional taxation measures to the tune of Rs170 billion under the policies agreed with the International Monetary Fund (IMF).

“Yesterday, we ended the final round of talks with the IMF after ten days of extensive discussions on power, fiscal, monetary sides,” said Dar while addressing the media.

The finance minister added that the government remains committed to implement the IMF agreement.

“We have received the draft of the Memorandum of Economic and Financial Policies (MEFP) from the IMF. On Monday, we would hold a virtual meeting with the IMF on MEFP,” he said.

He said the misgovernance of the last five years needs to be fixed. “I think that the 10-day dialogue has concluded positively, there is no obscurity anymore,” he added.

“After a few meetings, the IMF Executive Board would give its approval, and Pakistan would receive the next tranche of $1.2 billion or 894 million SDR,” he said.

“Under the policy package, the government would need to implement tax measures to the tune of Rs170 billion, and we would try not to impose any tax that will further burden the common man,” he said.

Dar said that the government would implement reforms in the power sector. “We would minimise the untargeted subsidies and curb the circular debt in gas and petroleum sector. This is one of the understanding in agreement,” he added.

He said that the commitment made with the IMF on Petroleum Development Levy (PDL) has been achieved. “Rs50 PDL on petrol has already been realised. Meanwhile, out of the Rs50 PDL on diesel, Rs40 has already been implemented, while the remaining amount would added in the coming months,” he said.

“Under the IMF negotiations, we have decided to raise the budget of Benazir Income Support Programme (BISP) from Rs360 billion to Rs400 billion, to protect the low-income segment.”

Dar remained optimistic that the commitments made by the friendly countries would materialise soon as well, and the pressure on foreign exchange reserves would subside.

According to the State Bank of Pakistan (SBP) weekly report issued on Thursday, the total liquid foreign reserves held by the country stood at $8.54 billion as of February 3, 2023 compared to $8.74 billion as of Jan 27, 2023.

During the week under review, SBP’s reserves decreased by $170 million to $2.918 billion due to external debt repayments. The SBP’s reserves can cover the import of two weeks.

“Due to past government actions, there is a credibility gap, they (IMF) do not trust us. IMF says that after reaching the agreement, the previous government not only didn’t implement the programme but reversed it, which damaged Pakistan credibility and reputation,” he said.

“On external financing, one source is the commitments made by friendly countries. Secondly, the privatization of Haveli Bahadur Shah and Baloki remains on track,” he said.

He clarified that taxes of Rs170 billion need to be collected in this fiscal year.

Dar’s press conference comes after the IMF statement issued at the conclusion of its mission’s 10-day visit to Islamabad, in which the lender stressed that while it welcomes the commitment, “timely and decisive implementation of policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability”.

The IMF added that virtual discussions will continue to finalise the implementation details of policies, implying that an agreement to revive the programme through a staff-level agreement may still take some time as Pakistan moves to execute the prior actions.

Earlier, Secretary Finance Hamid Yaqoob Shaikh told media persons on Thursday that an agreement on actions and prior actions was reached during the technical and policy-level talks with the IMF and staff-level agreement would be reached after the approval from the IMF headquarters in Washington.

The official also acknowledged that there are some differences between the two sides and the solution does not fall within the mandate of the Fund’s mission and the staff team has to explain to their seniors with regard to internal processing of these differences.

“We have reached an agreement with the Fund on actions and prior actions but staff-level agreement would be reached subsequently after the approval by Washington [IMF headquarters],” he said, adding that the Fund’s team shared memorandum of economic and financial policies (MEFP) with the Pakistani authorities and the country’s external financing needs were also discussed.

He said that the IMF’s board always seeks assurance of bilateral and commercial financing and Pakistan was not asked about anything different this time.

Comments

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Mian M N Shite Feb 10, 2023 02:59pm
0 + 0 = 0. Whatever way you look at it, there is no agreement with IMF.
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TimeToMovveOn Feb 10, 2023 10:39pm
@Mian M N Shite, Yes bro. Pakistan leaders are not honest. Dar has been lying through the roof. The gap between IMF and Pak is more than what Dar presents to the public. IMF wants all conditions implemented FIRST before it can release any money. So even if there are agreements in principle, Pak has to implement it first. The Current leadership has been a huge disappointmnet. Not that the previous one was any better.
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KhanRA Feb 10, 2023 11:27pm
Make the rich pay taxes. Start with politicians. Then remove Army backed companies which unfairly compete against the private sector. Impose real estate property taxes on housing societies. There are simple ways to not burden the common man, but Pakistan elites only care about themselves.
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KhanRA Feb 10, 2023 11:32pm
@TimeToMovveOn, at least the previous government didn’t put us on the track to default, and it even actually handled the pandemic quite well. Even Miftah Ismail was a good FM who earned a phd from one of the worlds best business schools. Yet this government got rid of him because of rishtedar mentality. The unforgivable fault of PML is the rampant nepotism. Why are two brothers in control? Why is the Marriyum given so much power? All because of nepotism - they don’t need to prove themselves to get power in PML, you just have to be part of the Sharif clan. If there are much better and more qualified candidates, they will be kept down in favor of members of the Sharif clan. This is the curse of nepotism.
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bonce Feb 11, 2023 12:26am
@KhanRA, Our army is big issue after retirement they start own business for example Fauji Fertilizer Fauji Sugar and many industries they are running. After retirement stay home and get the pension. Since 1947 this army Mafia every time they interfere and PM go home. Who suffer poor and middle class peoples and stability never come when this type of peoples involved.
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bonce Feb 11, 2023 12:29am
@KhanRA, Keep in your mind Punjabi peoples never like that our country will develop. If you read the history of Pakistan when we have two wings east and west. East love the country but west never like the result they separated from us and better than us.
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Dr fahad Feb 11, 2023 12:35am
@KhanRA, previous government have put us on this path by breaking the agreement with imf . Imran khan have lied to imf . And this government is same . Problem is people pressure to have tax free petrol , electricity theft and desire to have everything free and in return no one pay taxes to government . We don’t tax agriculture to provide cheap food . If we change word SUBSIDY with INVESTMENT . Than we can clearly see our priorities.
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