Tarin confident to get IMF nod on relief subsidies

ISLAMABAD: Shaukat Tarin, Federal Minister for Finance, on Wednesday said dividends of energy sector, additional revenue generated by Federal Board of Revenue (FBR), and amount saved after slashing development spending would be utilised to finance the government’s relief subsidies.

Tarin, who was speaking at a news conference at Pak-China Friendship Center, International Monetary Fund (IMF) should not have any objections over these measures as the budget deficit target would remain intact.

The government is currently revising the macroeconomic and fiscal framework to strike a staff-level agreement with the International Monetary Fund (IMF), and it was critical to convince the lender of the last resort these relief subsidies do not run counter to the agreed terms.

“We will finance PM’s Relief Package on account of reducing petrol and diesel prices by Rs10/litre and electricity prices by Rs5/unit without increasing the budget deficit,” said Tarin.

“These relief measures will be financed through capturing dividends of oil and gas companies worth Rs950 billion against the budgeted amount of Rs94 billion, using additional FBR collection, increasing from Rs5.8 trillion to Rs6.1 trillion, trimming PSDP (Public Sector Development Programme), and adjusting Covid-19 and Ehsaas scheme allocations.”

While defending Tax Amnesty Scheme for the industrial sector, Tarin said they had placed ring-fencing around the latest amnesty, but added he was against the general amnesty.

The construction sector amnesty helped fetch Rs500 billion investment and this latest amnesty would help achieve industrialization, he said and added that though inflation had started receding, risks arising from the supercycle of rising commodities and petroleum prices might hike inflationary pressures.

Finance minister said domestic prices had started coming down and if tomato prices were excluded then the CPI-based inflation would decrease 2 percent on monthly basis.

Dispelling the impression that Pakistan sought a $21 billion package from China through re-rolling of existing loans and some fresh loan requests, Tarin stated Chinese counterparts were only asked to relocate their industries to Pakistan and improve the whole supply chain of agriculture to boost productivity.

He said that Information Technology was the potential sector where Pakistan’s exports could go up to $50 billion thus playing an important role to bridge the existing trade gap.

However, top official sources confirmed to The News that the macroeconomic and fiscal framework was re-adjusted keeping in view emerging ground realities.

The national accounts were re-based in January 2022 as the GDP growth had gone up to 5.7 percent for the last fiscal year and the size of the economy increased to Rs55.5 trillion for 2020-21.

Now it is estimated the size of GDP will go up to Rs63.8 trillion for the current fiscal year. The one percent of GDP will reach around Rs638 billion.

The revised fiscal framework shared with the IMF shows the budget deficit is expected to go up to 7.5 percent of GDP and the primary balance might exceed -1 percent of GDP.

The fiscal deficit will go up mainly because of the inability of the government to collect Rs356 billion on account of the petroleum development levy as it is estimated that the government will be able to collect Rs80 billion only.

Some slippages are expected on nontax revenues so the overall shortfall and exceeding expenditures will hike the overall fiscal deficit.

The government had envisaged a budget deficit at 6.3 percent of GDP, but it will go up to 7.3 to 7.5 percent of GDP for this fiscal year.

On external account, the IMF had projected the current account deficit at $12.2 billion for the whole fiscal year of 2021-22 on the completion of the 6th review but it was already standing at $11.6 billion in the first seven months (July-January) of FY2022.

So the current account deficit will also go up, which warrants macroeconomic projection revision. All macroeconomic and fiscal framework targets were revised with massive margins for this IMF programme, which makes it increasingly awkward.