The visiting IMF mission has extended its stay in Pakistan for making more efforts to strike a consensus on the staff-level agreement as both sides have so far persisted with respective differences on immediate measures to reduce the revenue-expenditure gap.
The IMF has also asked Islamabad “to reduce its trade and commerce reliance on Beijing” and look for other international options by signing free trade agreements with other countries too, according to sources.
On Thursday night that both sides were busy in ironing out differences over revenue generation efforts as the FBR wants a further reduction in its revised target of Rs5,238 billion, but the IMF desires to see the plan aimed at removing distortions and expanding narrowed tax base on a permanent basis.
Without the reform plan, the IMF is not going to show a lenient attitude over FBR’s inability to maximize revenues efforts, one top official quoted the IMF team as saying during their interaction. The IMF still insists that if the need arises, the government must take measures to correct the situation halfway instead of waiting for the next fiscal year.
There is another problem for the IMF staff, because a couple of months back, the Fund’s Executive Board allowed FBR to slash down the target from Rs5.5 trillion to Rs5.238 trillion. This raised questions about the IMF team’s credibility and projections models related to FBR revenues.
The IMF staff will find it hard to defend its position if it agrees with further reduction in the FBR target, sources said. On the other hand, if the FBR’s revised target remains intact at Rs 5,238 billion, which experts believe is impossible to achieve in the given time.
According to senior finance ministry sources, the issue of discord between the IMF and financial authorities is the former’s insistence to cut down heavily Pakistan’s reliance on trade and commerce ties with China, and contract FTA with other international partners.
This is a position Islamabad is not prepared to even consider.
Although, the Ministry of Finance and other officials claimed in their background discussions that there was no ‘deadlock’ and the staff-level agreement would be finalized anytime soon. But when they were asked to share details, they were non-committal saying that the talks were underway, so nothing could be stated with credence.
Secondly, the PTI government is opposed to increase in the electricity and gas tariffs for next 12 to 18 months as PM Imran Khan has asked the relevant ministries for freezing their tariffs for a certain period, but the IMF questions that wisdom, saying the cash bleeding losses will not be curtailed if there is no cost recovery of energy utilities. “The IMF is asking for a viable alternate plan,” said the sources.
Extension in stay
According to the schedule of the IMF team available with The News, the Fund’s team was scheduled to hold talks with different ministries, the State Bank of Pakistan and departments from February 3 to 13, 2020 under $6 billion Extended Fund Facility (EFF).
There were two scheduled meetings on Thursday from 9am to 12.30 noon and the second meeting at 14.00 hours to 16.00 hours for discussions on Memorandum of Financial and Economic Policies (MEFP), if necessary.