ISLAMABAD: The International Monetary Fund (IMF) team will visit Pakistan at the end of this month for the ninth review.
Sources said that the Pakistani side is in constant touch with the IMF team and they will visit after November 20, 2022 however the ongoing political instability may jeopardise the ninth review.
Sources also said that the IMF has reportedly asked Pakistan to reverse or compensate with new tax measures the losses of recently introduced measures (agricultural subsidies, exporter subsidies and power sector delays).
The government recently announced a financial package of Rs 1800 billion for farmers and supply of electricity to five export-oriented sectors at Rs 19.99/ kWh the cost of which has been estimated to be Rs 110 billion.
“Reverse or compensate with new tax measures the losses of recently introduced measures (agricultural subsidies, exporter subsidies and power sector delays),” sources added.
In addition, the government has also been barred from introducing new tax concessions or exemptions or other preferential tax treatment or any new tax amnesty.
According to sources, under the Ninth Review the government has to resume needed consolidation, after significant slippages in FY 22, to meet the primary surplus target of 0.3 percent of GDP in FY 23.
In this regard there is a need for clear understanding on all new spending plans for FY 23, including the ones needed to respond to the floods.
There is also a need for agreement on compensatory fiscal measures to meet program targets, either through reprioritization of spending or new tax measures.
According to sources, the IMF has further urged the government to strengthen energy sector viability by timely implementation of electricity tariff increases (both quarterly adjustments and monthly FCAs).
The Fund has also asked the government to seek Cabinet approval of FY 23 Circular Debt Management Plan (CDMP), to guide a sustainable reduction in circular debt accumulation as agreed with the World Bank (WB), Asian Development Bank (ADB) and IMF.
“There must be no introduction of any new subsidies for electricity, and a commitment not to fiscalize power sector arrears, without agreement with the Fund,” the sources added.
Sources also said that the IMF also asked Pakistan to allow the exchange rate to move freely while forex intervention must be limited within agreed targets and gross reserve targets must be built up as planned, including by mobilizing committed bilateral creditor support ($ 4 billion).
The sources said the State Bank of Pakistan would be required to share AML/ CFT inspection of banks in relation to tax amnesty for the construction sector (end-September) – a structural benchmark (SB) agreed with IMF but which remains outstanding whereas Cabinet approval of amendments regarding crisis management arrangements is also awaited.
