The International Monetary Fund (IMF) is unlikely to release second last tranche of the stalled Stand-By-Arrangement (SBA) before the budget, informed sources revealed to Business Recorder.
Sources said that the IMF was not interested in one time revenue measures and wanted permanent resource mobilisation measures that would raise tax to GDP ratio with the long term objective of lowering dependence on borrowing and thereby creating a fiscal space for investment in social sector.
The rising fiscal deficit and inflation have been major concerns of the IMF posing serious challenge to economic stability. IMF, sources further maintained, believes that government policies, specifically its failure to comply with conditions stipulated in the Stand-By Arrangement, are to blame for a resurgence in the rate of inflation and fiscal deficit.
An official said that the IMF has also expressed concern that the government may not be able to achieve 5.5 per cent fiscal deficit specially after rollback of sales tax zero-rating on the local supply chain of five zero-rated sectors by introducing lower rate of 4-6 percent.
The IMF had reportedly conveyed to the Ministry of Finance its concerns about the weak fiscal framework and warned that the present situation was not sustainable. The Fund has urged the government to undertake policies to increase revenue and decrease expenditure on a permanent basis in an effort to move towards a sustainable fiscal framework.
Sources in the Finance Ministry said that the economic managers have not been able to give firm assurance to the IMF on resource mobilization, elimination of power subsidies and to push through a legislation of the parliament for an autonomous State Bank of Pakistan. However, they said that efforts are being made to take a number of steps from the next fiscal year to bring all the incomes including farm income into the tax net along with reforms in General Sales Tax.
The idea under consideration is that a host of measures would be taken, through the finance bill and SROs, to bring the informal sector into the tax net and move towards an equitable taxation system. IMF has reportedly emphasised that the fiscal deficit must be below 4 percent in the next fiscal year''s budge and inflation must be contained within single digits.