Confusion prevailed in the federal capital about the fate of talks - April 29 to May 10 - between International Monetary Fund (IMF) and Finance Ministry on a new bailout package on Friday - the last day of Fund team's scheduled stay in Pakistan.
A statement issued by the Finance Ministry on late Friday night said, "Pakistan and the visiting IMF Mission have made good progress in their discussions. Consultations will continue over the weekend."
Earlier during the day, the IMF team did not respond to any query when some members of the team left the Finance Ministry at 04:30pm.
When Business Recorder sent a text message to the IMF Resident Representative seeking some information about the outcome of the talks, Teresa Daban stated, "There is not any planned interaction with the media during the IMF discussion."
Rumours had it that Advisor to Prime Minister on Finance Dr Abdul Hafeez Shaikh had taken the draft of the final offer by the IMF to the PM Office but when this newspaper requested a senior official to confirm whether this was true, his response was "no IMF meeting was held."
An official of Power Ministry said that disagreement was on adjustment of Rs 202 billion as the Fund wants upfront adjustment (prior) of power tariff whereas Pakistani side's view was that tariff should be passed on to consumers in instalments. "There was agreement with the IMF on all the components of power sector except that the Fund wants to increase the power tariff upfront while the government wants the increase in phases," a senior official claimed.
Both sides also discussed increase in standard rate of General Sales Tax (GST) by one percent from existing 17 per cent to 18 per cent as well as substantial reduction in expenditures in the next budget.
Speculations were rife that IMF wants to abolish tax exemptions within the range of Rs 600 billion to Rs 700 billion in two years including tax exemptions of sales tax, income tax and customs duty in the budget for next fiscal year to increase the Federal Board of Revenue (FBR) tax collection to over Rs 5.5 trillion.
As the shortfall in revenue collection may be over Rs 450 billion in 2018-19 and with such a low base, the government is required to take measures for imposing around Rs 600 billion new taxes to increase the tax collection to over Rs 5.5 trillion in 2019-20. The increase in tax collection, as reported, free float exchange rate and depreciation of exchange rate as well as further increase in policy discount rate would further fuel inflation in the country. An official on condition of anonymity said the government, which is already under criticism from all quarters for poorly managing the economy after coming to power, can not afford further increase in inflation and wants phase-wise increase in energy tariff and taxes. That official said that IMF team unlike past was very harsh on its stance this time and was not ready to budge on its terms and conditions for a new programme.

Copyright Business Recorder, 2019

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