Pakistan sends MEFP draft to IMF as talks continue

IMF, tax on shopkeepers, FY 2023-24 budget

ISLAMABAD: Pakistan has sent Memorandum of Economic and Financial Policies (MEFP) draft to International Monetary Fund (IMF) as talks underway over the revival of $7 billion Extended Fund Facility (EFF) stalled for months, ARY News reported on Tuesday.

According to sources, the Fund will review the MEFP draft – sent by officials of Ministry of Finance and Revenue to seek a response – as Islamabad has agreed to several conditions including increasing energy prices and improve tax collection.

Sources told ARY News that the IMF will respond to the finance ministry officials by tomorrow. The government was likely to decide in principle to increase the sales tax as demanded by the lender, they claimed.

Sources further claimed that the government would increase the sales tax in various categories. The government is likely to take a decision to bring an ordinance for the mini-budget worth Rs170 billion, sources added.

It is pertinent to mention here that virtual talks between the International Monetary Fund (IMF) and Pakistan for the completion of the ninth review of $7 billion loan programme began a day earlier.

The officials of the finance ministry would brief the IMF about the implementation of the conditions set by them for the revival of the loan program.

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Meanwhile, the incumbent government accelerated implementing ‘tough conditions’ tabled by Fund to revive $7 billion Extended Fund Facility (EFF) stalled for months.

Sources told ARY News that the federal cabinet has approved the revised circular debt management plan through circulation, under which the government will end subsidies and jack up electricity price by Rs7.91 per unit in four quarterly adjustments – Feb-March 2023, March-May, June-August and September-November.

Sources further claimed that the federal cabinet also approved the withdrawal of electricity subsidy of Rs65 billion given to the exporters and farmers, with effect from March 2023. The subsidy of Rs12-13 paise per unit on electricity given to export sector will be withdrawn, they added.

Moreover, almost Rs250 billion will be recovered from electricity consumers by June 2023. Under the circular debt management plan, the government would impose a surcharge of Rs3.39 paise per unit.

‘Pakistan receives MEFP draft’

Earlier on Feb 10, Finance Minister Ishaq Dar said that Pakistan had received the Memorandum of Economic and Financial Policies (MEFP) draft from the International Monetary Fund (IMF).

In a press conference, Dar said: “Pakistan is expected to receive $1.2 billion from IMF after the completion of ninth review of $7bn Extended Fund Facility (EFF).” He further said that Rs170 billion in new taxes would be imposed through a mini-budget.

The minister went on to say that the government and global lender officials would hold a virtual meeting in this regard on Monday.

The finance minister said that Petroleum Development Levy (PDL) on diesel will be hiked to Rs50/litre under the IMF target. “Govt will raise PDL on diesel by Rs5 in March and April respectively to meet IMF target,” he added.

IMF statement

Meanwhile, the International Monetary Fund (IMF) issued an official statement following the conclusion of the 9th review talks on the stalled loan program.

IMF mission chief Nathan Porter, in a statement, said that the timely and decisive implementation of policy measures along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development.

The statement, issued after the mission concluded its 10-day Pakistan visit, welcomed Prime Minister Shehbaz Sharif’s commitment to implement policies that are required to “safeguard macroeconomic stability”. He also thanked the leadsfor the “constructive discussions”.

Read more: Pakistan-IMF talks fruitful, announcement due shortly: sources

The IMF chief noted “considerable progress” was made during the talks with Pakistani officials on “policy measures to address domestic and external imbalances”.

READ: IMF DEMANDS RECORDS OF PAKISTAN’S FLOOD RELIEF EXPENDITURES

The IMF mission chief said that the “virtual discussions” will continue between the two sides in the coming days to finalise the “implementation details” of the policies.

 

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