ISLAMABAD: Finance Minister Dr Abdul Hafeez Shaikh left for Dubai on Saturday night to lead a team of economic managers negotiating with International Monetary Fund for the release of sixth tranche under the standby arrangement.Finance ministry sources told Dawn that the sixth tranche of $1.7 billion out of $11.3 standby arrangement with the IMF was likely to be released during the fiscal year 2011-12 after the finalisation of a report by its review mission.
However, during the ongoing fifth review mission, the IMF team has reportedly expressed concern over non-implementation of reform measures to discipline the economy and high government subsidies. It wanted an assurance from the government for implementation of reformed general sales tax (RGST).
According to the sources, the Pakistani officials told the IMF team that the RGST bill would be incorporated in the Finance Bill 2011-12. The task has been made easy with the support of new government allies — Pakistan Muslim League-Q and Muttahida Qaumi Movement — and both the parties have been taken into confidence in this regard.
The official stance of the government is to evolve consensus among all stakeholders for the imposition of RGST, wealth tax and capital gains tax and to bring the services sector under the tax net, besides taxing agricultural income to broaden the tax base and address governance issues in resource mobilisation.
The technical team, led by Economic Affairs Secretary Wajid Rana and comprising Federal Board of Revenue Chairman Salman Siddique and other officials, informed the IMF that strengthening tax administration reforms and reducing tax slippages were the key targets for 2011-12.
The sources said the IMF team wanted Pakistan to limit its fiscal deficit to four per cent of GDP during the next fiscal year. But the government said it would contain the fiscal deficit up to 4.5 per cent. “It is expected that the figures will be settled at 4.2 per cent of GDP,” an official said.
The other major concern expressed by the IMF team during the fifth review mission between May 11 and 17 was the issue of untargeted subsidies as the government has failed to control the resurgence of circular debt in the power sector, heavy loans/bailout and support for public sector enterprises such as PIA, Railways and Pakistan Steel Mill and expensive commodity operations like fertilisers and sale of sugar through utility stores.
The government has already prepared plans to reduce expenditures on these heads and the finance minister is expected to brief IMF mission chief Adnan Mazarei on the success of these measures at various sessions during the talks.
The sources said the Pakistani team would try to persuade the IMF for the issuance of a letter of comfort to enable the government to obtain budgetary support of about $850 million from the World Bank and the Asian Development Bank during the current financial year.