Finance Minister Shaukat Tarin revealed on Monday that the International Monetary Fund (IMF) has asked Pakistan to renegotiate its loan programme in return for getting three weeks of extension in the process of implementing prior actions but the government did not agree to this.
Tarin revealed the recent development during a meeting of the Senate Standing Committee on Finance, which completed clause-by-clause reading of the Finance Supplementary Bill 2021, introduced to impose Rs375 billion worth of new taxes under a condition of the IMF loan programme.
Tarin stated that the sixth review date was January 12 but Pakistan took a three-week extension since both bills were in parliament for approval.
“When I approached them for extension, they (IMF) asked to renegotiate the programme,” he stated.
The minister stated that he did not agree to renegotiations, fearing that the IMF might impose new conditions. He added that the IMF had now agreed on January 28 or January 31 date for taking Pakistan’s case to its board and “the final date will be conveyed to us soon”.
The IMF’s desire to seek renegotiations suggests that the government does not have much time to meet all prior actions, posing it a challenge to secure approval of the SBP Amendment Bill 2021 from the Senate before the new tentative dates.
Under Article 70 (3) of the Constitution, any house of parliament has 90 days to approve a bill from the date of introduction. The National Assembly Standing Committee on Finance on Monday approved the SBP Amendment Bill, which once approved by the National Assembly, will be laid before the Senate for approval.
If the Senate approval is not secured this month, it could create problems for the government, which is also facing a new challenge in the shape of replacement of IMF Mission Chief to Pakistan Ernesto Rigo.
The sixth review was scheduled to be approved by the IMF board in June last year but has been lingering on due to delay in implementing the IMF’s conditions.
It is pertinent to note that the Senate Standing Committee on Monday finalised recommendations for the Finance Supplementary Bill 2021 and the report would be laid in the committee for final review and approval by committee members on Tuesday. The standing committee rejected a budget proposal to publicly disclose the asset declarations filed by politically exposed persons, civil servants and their spouses, except the armed forces.
Tarin promised that he would look into the proposal again in light of the Senate committee recommendation. According to the proposal, the details submitted by high-level public office-holders and civil servants will be made public to ensure transparency and the government will omit the secrecy clause from the tax law to ensure public disclosure of the information.
The Senate panel unanimously rejected the tax imposed on “naan” and “bread”, including the one prepared in bakeries. “Bread is consumed by all classes of society, and children of the middle class society use them for lunch,” Senator Farooq Naek stated, while debating the proposed amendment.
The committee also rejected the proposed imposition of tax on yogurt, butter, Desi ghee and milk, by a majority vote, while the tax had been imposed on flavoured milk, cheese, cream and whey.
The committee unanimously rejected the proposal of binding the corporate sector to make payments only through the digital mode on the plea that digital payments could not be enforced. Unlike the National Assembly Standing Committee on Finance, which approved the SBP bill in one sitting without reading it, the Senate committee members discussed each clause at length. The Senate panel rejected a number of taxes by a majority vote and gave recommendations on the way forward.
The standing committee proposed to impose tax only on imported bicycles of over Rs25,000 against the government proposal to impose taxes on all imported bicycles. Tarin showed his surprise over the inclusion of bicycles in the list of items, which would now be subject to 17% GST.
The imposition of tax on oilseeds, meant for sowing, was also omitted by the committee. Senator Musaddik Malik stated that it was imputative to agricultural production and innovations. Tax imposition on tillage and seedbed preparation equipment was also rejected through a majority vote. Cool chain machinery and equipment tax imposition was also opposed by the committee. Tax on plants for relocated industries was also unanimously omitted by the committee.
Speaking about the impact of mini-budget, Tarin said that there would be a slight increase in inflation but he did not quantify its exact impact. “The mini-budget has disrupted the entire economy of the country,” stated Senator Talha Mehmood, Chairman of the standing committee, while showing his dismay over the imposition of new taxes.
