ISLAMABAD: After revising the budget in line with International Monetary Fund’s demands, the government expects a breakthrough announcement from the global lending agency over the next few days to get direly needed bailout funds.
“Almost all the irritants between the IMF staff and the Ministry of Finance were addressed hours before the finance minister’s wind-up speech on Saturday,” an official said, adding that the announcement about the successful completion of the ninth review was an IMF’s privilege and just a formality now.
The official said it was now up to the IMF’s mission to line up the precise dates for the lender’s executive board approval and disbursement of funds. However, he acknowledged that it was not on the calendar until June 30, when the $6.5 billion Extended Fund Facility agreed in 2019 is set to expire.
Prime Minister Shehbaz Sharif also held back-to-back meetings with IMF Managing Director Kristalina Georgieva in Paris last week.
Initial revenue and spending proposals for fiscal 2024 have been significantly changed after lender’s objections
A government official told Dawn the initial budget, presented on June 9, was significantly changed after the original budget had been completely debated upon in the parliament.
“You can say this is the first time that the parliament passed a budget that it had not discussed, and major adjustments were announced after the parliamentary debate was over,” he said.
The changes include Rs215bn additional tax measures, a Rs85bn spending cut, withdrawal of an amnesty on foreign exchange inflows, lifting of import restrictions, a Rs16bn hike in BISP allocations, and the powers to increase the petroleum levy from Rs50 to Rs60 per litre.
Officials, however, insisted that the petroleum levy would not be increased on the first day of the next fiscal year, i.e. July 1. In fact, the authorities believed the increase might not be required at all unless the consumption of petroleum products drastically went down from an already depressed level.
They said the authorities were also talking to the Islamic Development Bank for maximum upfront disbursements out of its already announced portfolio of over $4bn to sustain low foreign exchange reserves until IMF support arrives.
The removal of import restrictions would also take some time to come into force because of upcoming holidays and inherent systematic and administrative delays.
More than $4bn import consignments require clearance against the total foreign exchange reserves of $8.86bn, including the central bank’s holdings of $3.54bn.
The IMF’s resident representative in Pakistan, Esther Perez Ruiz, did not respond to a request for comment.
After the budget was announced on June 9, she publicly questioned the budgetary measures saying it missed the opportunity to broaden the tax base in a more progressive way and the long list of new tax expenditures further reduced the tax system’s fairness.
Ms Ruiz also raised concern that the new tax amnesty ran against the Fund programme’s conditions and governance agenda and created a damaging precedent. She asked the government to refine the budget before passing it.
Authorities in Pakistan said these demands had now been addressed.
Published in Dawn, June 26th, 2023
