The International Monetary Fund (IMF) is considering returning to a quarterly review schedule for Pakistan’s $7 billion bailout package, following early signs of financial slippages. However, Pakistani officials maintain that no final decision has been made on this matter.
The issue of quarterly reviews arose during an unscheduled visit by the IMF mission to Islamabad, which was sent to ensure the program stays on track. The finance ministry is also working to keep provincial governments aligned with the conditions of the bailout package. Sources indicate that quarterly reviews would allow continuous monitoring of the 40 conditions tied to the $7 billion deal, though Pakistani negotiators assert that no decision has been made yet between biannual and quarterly reviews.
The IMF board approved the $7 billion deal about six weeks ago, releasing an initial $1.1 billion, with the remaining amount to be disbursed in six equal tranches based on the successful completion of half-yearly reviews. The first review was scheduled for March next year, but due to challenges in fiscal management, taxation, and external financing, the IMF mission arrived earlier than expected. The previous IMF agreement (2019-2022) also used quarterly reviews.
Quarterly reviews would allow the IMF to closely monitor the implementation of reforms, giving the Ministry of Finance stronger oversight of the 40 agreed conditions. The IMF mission has already held initial talks with various ministries, including discussions on the performance of the Federal Board of Revenue (FBR), power sector statistics, and macroeconomic targets.
The FBR briefed the IMF on its performance during the first quarter, explaining a Rs90 billion shortfall, which was attributed to incorrect macroeconomic assumptions. Despite this, the FBR claimed it had met the target for tax collection from traders, though the IMF’s Rs10 billion target was missed under the Tajir Dost scheme. The FBR plans to target non-filer wholesalers next to boost tax collection.
Finance Minister Aurangzeb announced the abolition of the non-filer category, and despite revenue shortfalls, the FBR insists it can still meet the tax-to-GDP target. However, the IMF has not yet indicated whether it will accept the FBR’s reasoning or push for a mini-budget, as promised by the Pakistani government.
The IMF also questioned low recoveries from the real estate sector despite higher taxes on property transactions and received updates on the National Fiscal Pact’s implementation. The pact, which aims to transfer expenditure responsibilities to the provinces, faces delays due to the failure of some provincial governments to approve agricultural income tax laws. The IMF may offer technical assistance to help implement the pact fully.
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