ISLAMABAD: After introducing a couple of budgetary and regulatory measures, Finance Minister Ishaq Dar reached Dubai on Monday to conclude policy-level talks with the International Monetary Fund (IMF) for disbursement of $550 million.

Finance ministry sources told Dawn that with the latest five per cent increase in general sales tax on petroleum products to 27pc and delaying passing on to consumers the benefit of reduction in fuel price adjustment on power tariff for December, the government would not need to seek any waiver in structural benchmarks.

The sources said the only pending issue on which the IMF has been asking repeated questions was the non-recovery of Gas Infrastructure Development Cess (GIDC), but the lending agency had been told that the matter was currently pending before the court.

While the government could only pursue with courts for early disposal of the GIDC related cases, it stood prepared to take contingency measures to make up for the revenue loss as had been done in the case of increase in GST from 17pc to 27pc on petroleum products.

The government has already given an undertaking to the IMF to cut public sector development programme by Rs258 billion against budgetary allocations to meet the gap arising out of revenue shortfalls.

An official said the government had also taken a policy decision at the level of the Economic Coordination Committee (ECC) of the Cabinet to pass on to consumers all costs of power supply including tariff differential with Azad Kashmir, system losses, theft and financing cost for non-recovery of over Rs580bn receivables. This will be enough to satisfy the IMF for the time being, notwithstanding initial resistance by the power regulator to make this really happen on ground.

He said the two sides would also touch base on priority areas for next year’s budgetary proposals, even though specific issues would be settled by next review before June 2015.

The Fund had been told that the Federal Board of Revenue (FBR) had collected Rs1,165bn in the first half 2014-15 as total revenue collections stood at Rs1,638bn after inclusion of Rs473bn in non-tax revenue.

Of these revenues, the federal government is reported to have transferred Rs724bn to the provinces under the divisible pool share, leaving Rs914bn for the federal government to meet defence, security, debt servicing, Public Sector Development Programme (PSDP) and running the civil government.

As a consequence, the total federal expenditure stood at Rs1,698bn in July-Dec, leaving a fiscal deficit of Rs784bn. However, a Rs98bn cash surplus offered by the four provinces scaled down consolidated fiscal deficit to Rs686bn.

During the first half, the government spent Rs605bn on payment of mark-up, Rs143bn on PSDP and Rs628bn on defence and civil security. The deficit financing was met through Rs155bn of external sources, Rs178bn domestic bank borrowing and Rs353bn through non-bank borrowing.

A team of officials from the ministries of finance, water and power, and petroleum had already been in Dubai for almost a week for exchange and confirmation of data, mostly relating to the July-Dec period.

A finance ministry statement said the policy-level talks that began on Monday would continue for the next three days. The finance minister and the head of IMF Review Mission Jaffrey Frank would also hold a joint press conference after the talks.

Published in Dawn February 3rd , 2015

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