Ongoing IMF review

EDITORIAL: Reports on the discussions between the International Monetary Fund (IMF) team and the government indicate that the Federal Board of Revenue (FBR) blames the Middle East conflict for slowing economic activity and negatively impacting revenue collections.

The IMF team is currently in-country for the fourth quarterly review of the $7 billion Extended Fund Facility (EFF), the third review of the $1.4 billion Resilience and Sustainability Facility (RSF), and Article IV consultations.

The scale of the impact varies from country to country but is significant for Pakistan for three reasons: (i) import tax collections, specifically sales tax and withholding tax at the import stage, are lower than projected in the budget though the Board claimed that the first quarter target of 3.053 trillion rupees would be met.

The reason, experts point out, could well be because the last date of filing for non-corporate entities is 30 September; (ii) enforcement measures envisaging sales tax collections at factory sites for three items notably sugar, cement and more recently fertilizers are being proactively implemented but contributing to a rapid rise in inflation of perishables and other items that should raise concerns over the already high percentage, 44.2 percent, of Pakistanis living below the poverty level as determined by the World Bank; and finally (iii) The decision to raise petrol subsidies will narrow the fiscal space further.

Furthermore, it remains unclear whether the International Monetary Fund (IMF) team will support continuing a subsidy scheme targeted at owners of motorcycles and cars under 800 cc who are not eligible for the Benazir Income Support Programme (BISP).

Additionally, the Standing Committee of the National Assembly was informed last Thursday that the Fund seeks the already agreed 174 legislative amendments; out of which, two were enacted.

First, the new public procurement rules notified this Tuesday envisage all procurement through the e-Pak Acquisition and Disposal System (EPADS), requiring procurement agencies to publish their annual procurement plans on both EPADS and the PPRA website.

The objective clearly is to ensure that procurement agencies are unable to bypasses these rules by citing emergency procurement needs which necessitate a short cut of the process.

Secondly, the Fund staff was informed that around 10,000 federal employees will be required to digitally declare their assets by end of this month as part of a mandatory asset declaration regime.

In this context it is relevant to note that parliamentarians, including their spouses and dependents, are required to submit their assets and liabilities to the Election Commission of Pakistan by the last day of the calendar – information that used to be publicly available.

Disturbingly, the National Assembly passed the Elections Amendment Bill in January this year, adding provisions that restrict public access to, or the publication of, assets if a security threat exists — a threat that is, no doubt, assessed by the government.

While the attempt to name and shame tax evaders and avoiders has not been effective yet, one would hope that the returns of our elected representatives, as well as those paid at the taxpayers’ expense and their families — including adult children (since many use that loophole to stash illegally gained assets) — are available for public scrutiny. It is not yet known whether the Fund will agree to waive the harsh upfront conditions due to the ongoing Middle East conflict, which has ushered in a global recession. Sadly, to date, there have been no waivers to provide relief to the poor. For example, the petroleum subsidy extended by the government in April of this year had to be withdrawn after the Fund staff refused to approve it.

Pakistan’s need to remain on the IMF programme is critical, given that the over $11 billion in annual roll-overs from China and Saudi Arabia are contingent upon its participation.

However, with poverty rising to politically dangerous levels, one would hope that both the Fund and the authorities agree to some deferrals. This would require the government to slash its current expenditure by at least 2.5 trillion rupees, thereby increasing its leverage with the Fund.

Copyright Business Recorder, 2026