All IMF targets met: finance ministry

ISLAMABAD: Just ahead of kick-starting talks with the IMF review mission from today (Thursday), the finance ministry claimed on Wednesday that Pakistan met all the agreed targets for the successful completion of the second review and release of the third tranche of $1.1 billion under the Standby Arrangement (SBA) programme.

“Pakistan has met all structural benchmarks, qualitative performance criteria and indicative targets for successful completion of the IMF review. This would be the final review of SBA and staff level agreement is expected after this appraisal,” the ministry said in an official announcement on Wednesday.

However, there would be some areas of concern for the upcoming IMF review talks as the SBP provided its profits of Rs974 billion for the first six months against the total envisaged profit of Rs1,074 billion, so the major chunk was already secured. The nontax revenue in the second half (Jan-June) 2024 might not bring the desired figures. The FBR’s tax collection target of Rs9,415 billion would be another area of concern as the board achieved its eight-month target but also witnessed a shortfall of Rs33 billion in February 2024. The FBR also provided exceeded refunds after the formation of the incumbent government. The IMF might raise the issue of FBR’s ability to collect the March 2024 target, which stands at Rs879 billion. The FBR might not be able to collect the last quarter (April-June) target as well to display the fixed target of Rs9,415 billion.

The IMF will also raise the issue of the timeframe for slapping tax schemes for retailers.

The provinces’ ability to generate desired revenue surplus might also surface as another area of concern. The circular debt in line with the revised circular debt management plan (CDMP) would also surface in discussions. The debt servicing bill might require some reconciliation as the government revised upward its budgetary requirement from Rs7,300 billion to Rs8,300 billion, but the IMF estimated it at around Rs8,600 billion.

There might be some points of concern for the IMF review team, including the inability of SBP to raise its foreign exchange reserves to higher levels, which are currently hovering around $7.8 billion on March 1, 2024.

When contacted, independent economist Dr Khaqan Najeeb said Pakistan would be able to complete the second review under the SBA programme but there were some concerns on which the negotiating team would have to satisfy the IMF.

The upcoming talks have become quite crucial after confirmation from the finance minister that Pakistan would be looking for a longer and larger programme under the Extended Fund Facility (EFF). The upcoming talks would finalise the basic contours of the EFF programme to define whether it would be front-loaded or backloaded or mixtures of these two options.

The meaning of front loading of IMF programme is going to determine whether all major adjustments in fiscal and monetary fronts will be forced in first-and-a-half year programme or the design of the programme and implementation will be staggered over a period of three years.

The finance ministry had already shared its progress report with the IMF review mission. Pakistan and the IMF had struck a 9-month SBA on June 30, 2023 and so far, Islamabad received $1.9 billion and now vying to secure the last tranche of $1.1 billion through the successful completion of the ongoing review. “The second review of Stand-By Arrangement (SBA) with International Monetary Fund (IMF) is scheduled from 14th (today) to 18th March 2024 in Islamabad. Once Staff level agreement is reached, final tranche of USD1.1 billion will be disbursed, following the approval of Executive Board of IMF,” the ministry added.

In a separate meeting, Finance Minister Muhammad Aurangzeb visited the FBR headquarters in Islamabad. Chairman FBR Malik Amjed Zubair Tiwana welcomed the minister, who led an introductory meeting with the FBR board members to discuss the board’s performance and future initiatives. Aurangzeb stressed the urgent need for digitalising the FBR to enhance transparency and efficiency in tax collection. These initiatives would focus on enhancing tax collection through improved FBR governance, comprehensive documentation of the economy, and full-scale digitalisation. The government is considering strategies to broaden the tax base by incorporating wholesale/retail, real estate and agriculture sectors into the tax framework.

Aurangzeb said that digitalisation was pivotal to modernising the tax administration. He said by leveraging technology and enhancing transparency, “we can build a more equitable tax system that fosters economic growth and benefits all citizens”. The meeting concluded with a firm commitment from both sides to work towards promoting the welfare of Pakistanis. Minister Aurangzeb praised the dedication of FBR team and pledged the government’s full support in implementing transformative measures.