Government seeks IMF assistance despite Dar’s tirade.
The finance ministry says it is prepared to handle the fund’s financial worries.
ISLAMABAD: After Prime Minister Shehbaz Sharif noticed the rapid deterioration in relations with the international lender over the past few days, Pakistan announced on Friday that it was prepared to address the IMF’s concerns on the budget for fiscal year 2023–24.
The Ministry of Finance responded to the IMF’s concerns about the new budget with an unexpected statement: “We are not doctrinaire about any element of the budget FY24 and are keenly engaged with the IMF to reach an amicable solution.”
The current declaration represents a change from the prior rigid posture adopted by Finance Minister Ishaq Dar, who on Thursday declared that Pakistan will not accept the IMF’s advice about the granting of tax exemptions.
The Express Tribune was informed by sources that the prime minister has scheduled a meeting for Friday morning.
The sources stated that after the PM’s meeting, the administration decided to try again with the 9th review, which contains a bonus of $1.2 billion tranche. He urged the finance ministry to try to address the issues raised by the IMF with regard to the new budget.
A day ago, it appeared as though the Pakistan-IMF program had come to an end following a tit-for-tat exchange between the IMF and the Pakistani government. Early this week, the finance minister also met with the head of the IMF mission; this discussion again produced no results.
On condition of anonymity, a senior government official stated, “It is in our national interest that we complete the 9th review and secure another loan tranche of $1.2 billion.
He claimed that everyone on the economic team was committed to at least finishing the ninth assessment of the program.
The prime minister has intervened numerous times to keep the IMF program alive. The previous time, he also called the IMF managing director on the phone to ask her to finish the ninth evaluation.
It requires two to tango, said Dar on Friday during a meeting of the National Assembly Standing Committee on Finance. “We’ve made all the efforts to complete the ninth review, but it takes two to tango,” Dar remarked.
The most recent dispute began when the IMF objected to a serious breach of an agreement struck with it, claiming the proposed budget did not follow the agreement reached between the Prime Minister and the IMF Managing Director.
Eshter Perez Ruiz, the IMF’s resident representative, stated on Wednesday that Pakistan had missed the chance to increase the tax base in the new budget and that the “new tax amnesty” scheme was against the conditions of the IMF’s program, against the agenda for good governance, and also sets a “damaging precedent.”
“We all know that without the IMF we cannot solve our problems,” said PML-N MNA Ali Pervaiz. “The government should win the IMF, show some patience and try to complete the 9threview.” He recommended that the administration alter the budget in order to satisfy the IMF.
The Pakistani government was totally committed to the IMF program, according to the statement from the Ministry of Finance, and it was eager to at least finish the 9th Review.
According to the Finance Ministry, the coalition administration has already made a number of difficult and expensive political decisions in this regard.
The 9th IMF Review was conducted in early February 2023, according to the Ministry of Finance, and the Pakistani government swiftly resolved all technical issues.
The Finance Ministry reported that “the only outstanding issue was that of external financing, which we understand was also amicably resolved in the Prime Minister’s telephone call with the MD of the IMF on May 27, 2023.”
The finance minister acknowledged the unresolved issue with external financing for the first time. According to its current understanding, Pakistan was to set aside $3 billion prior to the Staff Level Agreement and the remaining $3 billion following the agreement but before the board meeting.
Although the Budget for FY 24 was never included in the 9th Review, according to the Finance Ministry, “we shared the budget numbers with the IMF mission in accordance with PM’s commitment to the MD IMF.”
Ishaq Dar stated on Thursday that until the IMF agreed to a separate 10th assessment of the program, he had never been in favor of sharing the budget.
The ministry claimed that the government was “continuously engaged with them (IMF) even on the Budget”.
The Finance Ministry stated that the FBR had increased its tax base by 1.161 million new taxpayers, or 26.38%, over the past 11 months in response to the IMF’s concerns over a small tax base. This experiment is ongoing and will continue.
Another significant step in this approach is the 0.6% advance adjustable withholding tax on cash withdrawals exceeding Rs. 50,000, it continued.
However, a report from the Reform and Revenue Mobilization Commission reveals how thin the revenue base of the FBR is. Only 13,958 people, or just 0.39% of all filers, paid 75% of the income tax during the fiscal year 2022, according to the Ashfaq Tola-led Commission. 75% of the income tax in India was paid by 22% of taxpayers.
In addition, just 3.6 million of the 7.6 million people who have registered with the FBR and filed returns have done so, demonstrating the FBR’s inability to even collect returns from individuals who have previously registered with it.
According to the Finance Ministry, “the tax exemptions that were announced in the Budget are triggers of growth in the real sectors of the economy.” It was noted that this was the long-term solution for giving the average person a job and a means of subsistence. In any event, the sum is not that large.
The IMF, however, is opposed to tax exemptions, regardless of how much money is involved.
Dar stated on Friday that tax exemptions were crucial for the upcoming fiscal year if the nation wants to increase its growth rate from 0.3% to 4%.
The finance ministry stated that the budget’s pro-poor efforts are not just for BISP recipients, whose funding has been increased from Rs400 to Rs450 billion, in response to the IMF’s criticisms of the BISP allocation.
The budget allocates Rs 35 billion for targeted subsidies on five essential food products through the Utility Stores Corporation for families up to a PMT scoring 40. There are millions of vulnerable people living above the poverty line. According to the ministry, BISP beneficiaries can also use this facility.
The Finance Ministry stated that the “only change is to dollarize the value of an existing provision of IT Ordinance” in response to the amnesty problem, which the IMF has harshly criticized.
The government has proposed in the budget a no-questions-asked ceiling on unexplained income of Rs50 million to $100,000, or a staggering Rs30 million at the current exchange rate.
Ishaq Dar’s performance as finance minister was praised in public by the prime minister.
Ishaq Dar is working day and night despite the serious economic difficulties, the PM remarked. Everyone has their own perspectives, but the PM stated that there is unanimity over Dar’s integrity and indefatigable work ethic due of the ongoing IMF dispute.
The PM declared that in order to meet the IMF’s requirements, “we have turned upside down” because the interests of the nation require that we move forward by coming to a short-term agreement with the IMF.
The PM remarked, “Our horns are still locked with the IMF,” and he urged people to pray that the nation could ultimately emerge from its challenging economic predicament. He also assured them that the nation will undoubtedly triumph, as it had in countless other trying circumstances in the past.
Those who speak against Finance Minister Ishaq Dar and pull his leg, according to PM Shehbaz, have no business remaining in the PML-N. Dar has wrecked his health by working nonstop day and night, according to the prime minister, but some people still make fun of him.
