IMF not too ‘keen’ on relief steps inbudget, links them to FBR revenue

Ag APP

ISLAMABAD: Signaling its reluctance to grant a major relief to the salaried, property, beverage, and export sectors, the visiting IMF team has linked the FBR’s tax collection target with reduction in expenditures.

This is the crux of the ongoing parleys, as the team is going to accomplish its visit on Friday (today). However, the Fund will make an exception for the defence budget, as Islamabad will take an appropriate decision to hike the defence spending in view of the current geopolitical environment.

Prime Minister Shehbaz Sharif and his team Thursday held a meeting with the IMF team led by its Director for the Middle East and Central Asia Jihad Azour.

Pakistan has requested the Fund to defer an increase in the FED on fertilizer from 5 to 10 percent and 5 percent imposition on pesticides. The IMF may grant its assent to some extent on the prime minister’s request. The increase in salaries and pensions would be minimal, mainly because the much-trumpeted rightsizing exercise had lost its steam.

“We are clueless about how this number crunching for finalizing budgetary estimates will be done,” said sources, adding that the government would announce the budget on June 2 following which virtual talks were expected to continue.

Before the Finance Bill 2025 becomes a finance act, all IMF conditions would be aligned and fulfilled to avoid criticism during the budget approval process.

However, a top government official confirmed that the taxation would set the country’s direction for the next couple of years, as they were making last ditch efforts to convince the IMF to allow reduction in the rates of income slabs for the salaried class. “The FBR’s tax collection target will be fixed over Rs14.1 trillion in the coming budget depending upon the ability of the Finance Division to reduce its expenditure proportionally.”

Defence budget allocation will only be an exception in the next budget, as it will be hiked keeping in view the country’s needs.

Another official said the government had made arrangements to generate $1 billion commercial financing in June 2025 in the current fiscal year as the Asian Development Bank (ADB) had committed a grant of $500 million. Because of this $500 million guarantee, a consortium of Standard Chartered Bank and Dubai Islamic Bank is expected to generate $700 million commercial loan.

The government has requested three other UAE-based commercial banks to generate $100 million each in order to raise a total of $1 billion loan till June 2025.

Meanwhile, the FBR Thursday informed the National Assembly Standing Committee on Finance that the IMF would not allow reversion to the Final Tax Regime (FTR) as the tax machinery had introduced Minimum Tax Regime (MTR) for exporters. Another issue brought up before the committee was that the local supplies of exporters were taxed, while the imported goods were not taxed. The FBR high-ups replied that the IMF might ask for removal of this distortion and asked the FBR to bring imported goods for export purposes into the tax net.

During the meeting, Karachi Chamber of Commerce and Industry (KCCI) president presented a series of proposals for the upcoming national budget.

APP adds: Meanwhile, Prime Minister Muhammad Shehbaz Sharif Thursday reaffirmed the government’s commitment to fast-track institutional reforms alongside macroeconomic stabilization, asserting that Pakistan was now firmly on the path to economic development, following a period of recovery and stability. “With the grace of Allah, Pakistan is now moving from economic stability toward sustainable growth,” he said during his meeting with the IMF team.

The discussions focused on the implementation and progress of ongoing IMF programme in Pakistan. Both sides expressed satisfaction over the economic reforms undertaken by the government and their accruing positive outcomes.

Meanwhile, chairing a review meeting on gas supply and consumption in the country, Shehbaz called for further reforms in the gas sector to gradually reduce and eliminate the volume of circular debt through further reforms in the gas sector. He was presented with a long-term comprehensive plan on gas supply and consumption in the country during the meeting. Shehbaz expressed satisfaction over the establishment of various blocks to increase domestic gas production and discover new reserves. He underlined that the energy sector reforms were the top priority of the government. The prime minister was also briefed on the financial stability of the gas sector, long-term planning and improvement of the governance system.