ISLAMABAD: Pakistan is trying to narrow gaps with the International Monetary Fund (IMF) over revenue collection projection for the next seven months (December-June) in a bid to end the uncertainty that has stemmed from the delay in the 9th review of the Extended Fund Facility (EFF) programme, Dawn learnt from official sources on Monday.
The fund officials estimate a shortfall of Rs422 billion in FY23, which the Federal Board of Revenue (FBR) has rejected. The board has, however, put forward its estimates before the IMF, stating that despite falling imports, the projected budgetary target can be achieved.
And FBR estimates show no need for fresh taxation measures to fill the proposed gap. However, IMF insisted on additional revenue measures to keep the revenue collection on track to reach the projected tax target of Rs7.47 trillion by the end of June 30, 2023, a 21.5 per cent growth over the last year’s collection.
The FBR collected Rs2.688tr in July-November, exceeding the target set for the period by just Rs8bn.
Says expanding direct tax collection will offset import stage shortfalls
The gap in reporting mechanism between Pakistan and IMF did not confine only to FBR revenue collection but also include differences over the collection of petroleum development levy (PDL). The IMF estimates a shortfall of Rs300bn under the PDL in the current fiscal year. Pakistan’s finance ministry estimate this shortfall at Rs50bn, which was rejected by the IMF.
Consumption of petroleum products also declined 22pc in 5MFY23, which means lower general sales tax collection from the petroleum sector, one of the major revenue spinners.
Well-placed official sources told Dawn that FBR has already shared details of revenue collection in December and the second half of the current fiscal year. “We have informed the fund officials that the FBR target will be achieved without any additional revenue measures,” the source said, adding one of the main revenue sources is the impressive income tax collection.
The direct tax collection rose 53pc in 5MFY23, the source said, adding this trend will alone be sufficient to offset the impact of shortfall in revenue collection at the import stage.
Contrary to this, the IMF has already conveyed to Islamabad details about the shortfall in revenue collection in the second half of 2022-23. “We have not received any reply from the IMF on our estimations regarding revenue collection in the second half”, the source said.
Last week FBR Chairman Asim Ahmad visited Karachi, the hub of economic activities, and directed top tax officials to gear up their efforts to achieve maximum revenue collection and also clear backlog pending litigation. Mr Asim has given them specific targets in this regard as well.
On Tuesday, Finance Minister Ishaq Dar is also visiting FBR to get a briefing on the revenue collection performance. Mr Dar is also very desperate for the early conclusion of the 9th review, which should have been completed by the end of October.
The source said that the Ministry of Finance was also sharing PDL collection details with the IMF after questions were raised over its reporting mechanism and shortfalls.
“The issue will only be resolved once both sides minimise their gaps over the reporting mechanism”, the source said. The delay in the IMF review is linked to a pragmatic approach over revenue collection targets as well as PDL collection in the next half of FY23.
Pakistan entered a $6bn IMF programme in 2019, which was increased to $7bn earlier this year. The programme’s 9th review is currently pending with remote talks being held between IMF officials and the government for the release of the $1.18bn tranche.
Published in Dawn, December 20th, 2022
