Pakistan’s foreign exchange reserves are drying up fast and the currency is at a record low against the US dollar
Pakistan’s foreign exchange reserves are drying up fast and the currency is at a record low against the US dollar
Pakistan is struggling with money crunch deal with the International Monetary Fund (IMF) to restore $6 billion aid package stalled And open the doors to funding from other international sources, according to a media report on Wednesday.
The Pakistan team, led by the IMF Staff Mission and Finance Minister Miftah Ismail, reached a make or break deal on Tuesday night after officials committed to generate Pakistani Rupee (PKR) 43 rupees for the 2022-23 budget. was agreed upon. 600 crore and gradually increasing the tax and petroleum levy to Rs 50 per liter, dawn Newspaper reported.
An Extended Fund Facility Package of $6 billion for a period of 39 months was agreed in July 2019. So far only half of the promised money has been returned. The revival of the facility will immediately provide access to the $1 billion that Pakistan desperately needs to cushion its dwindling foreign exchange reserves.
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The IMF mission will finalize the monetary targets with the State Bank in the next few days and, in the meantime, share the draft of the Memorandum of Economic and Financial Policy (MEFP).
The MEFP will also include some pre-actions that will be required for implementation before the IMF board takes Pakistan’s case for approval and the subsequent disbursement of about $1 billion next month.
“We have now closed the budget in consultation with the IMF,” Finance Minister Ismail told reporters. He said that all the budget related issues have been resolved with the fund.
Citing top government sources, the report said that in order to win over the global lender, the Pakistani side agreed to start charging petroleum development levy on all petroleum products, which will be gradually increased by Rs 5 per month. The maximum will be reached up to Rs 50.
In another comeback, the government imposed a 1% poverty tax on firms earning Rs 15 crore, 2% on those earning Rs 20 crore, 3% on above Rs 25 crore and 4% on those earning Rs 30 crore and above. agreed. In the original budget, the government had set a 2% poverty tax only on those earning Rs 30 crore and above.
Sources said the IMF team would now finalize the targets for net international reserves and net domestic assets, but everything was settled on the part of the agreement. The IMF team will share its draft MEFP with the government on Friday.
The Shehbaz Sharif-led coalition government has agreed to revise the annual tax collection target for the year 2022-23 to around Rs 42,200 crore by taking additional tax measures to pacify the technical team of the IMF.
“We have taken concrete additional tax measures without increasing the tax burden on the poor,” the report quoted well-known sources in the country’s finance ministry as saying. Additional tax measures will be announced by the Finance Minister in the last budget speech.
Although the government in its first budget shrugged off unpopular tax measures for fear of political backlash and pinned its hopes of maximizing revenue from higher-than-expected inflation and economic growth, the lower revenue target did not go down well with the IMF, which Asked Islamabad to take additional measures to make the revenue collection target more realistic.
The Fund’s preliminary estimates that additional measures would be required were conveyed to the Finance Ministry soon after the budget was announced.
As part of the deal, the government also agreed to do away with provisions for additional wages and pensions, for which Rs 20,000 crore was set aside as block allocation. Instead, a separate allocation of contingencies was made, but this would be strictly for emergencies like floods and earthquakes so that the amount was not spent.
Pakistan has also committed to deliver a primary budget surplus of Rs 15,200 crore, which means that revenue will finance all expenses – apart from interest payments – and will still leave a Rs 15,200 crore surplus in the national kitty.