The International Monetary Fund (IMF) review mission has prolonged its stay in Pakistan by one day due to the inability of both parties to reach a consensus on a staff level agreement for the second review and the release of the third tranche, valued at $1.1 billion under the Stand By Arrangement (SBA).
The IMF is awaiting assurance from Prime Minister Shehbaz Sharif before finalizing the deal, particularly on issues such as raising electricity and gas tariffs effective from July 1, as well as implementing quarterly tariff adjustments and fuel price adjustments.
Despite the provinces agreeing to a revenue surplus target of Rs600 billion, this remains a contentious area, suggesting that adjustments may be necessary to reach consensus on finalizing the Memorandum of Economic and Financial Policies (MEFP).
Another point of contention between the IMF and the government is the implementation timing of the retailers’ scheme. While the Federal Board of Revenue (FBR) suggests launching it in the next budget for better preparation, the IMF favors immediate action.
It remains unclear how the IMF will accommodate the retailers’ scheme in the staff level agreement necessary for the release of the $1.1 billion tranche.
The IMF has revised monthly revenue collection targets with the expectation that the FBR will achieve its tax collection target of Rs9,415 billion by June 30, 2024.
Pakistan may also convey its intention to pursue a long-term bailout package under the Extended Fund Facility (EFF) program to the IMF mission. Although verbal communication is currently planned, Islamabad is likely to formally submit its application during the annual spring meetings of IMF/World Bank scheduled from April 15 to 20.
Finance Minister Muhammad Aurangzeb will lead the Pakistani delegation during the meeting from April 17 to 20.
Despite no scheduled meetings with relevant ministries and departments on Tuesday, discussions will revolve around finalizing the draft Memorandum of Financial and Economic Policies (MEFP) to reach a staff level agreement. This urgency is fueled by the imminent expiration of the existing SBA on April 12, 2024.
To meet the FBR’s target of Rs9.4 trillion by the end of the fiscal year, the tax authority must collect Rs879 billion in March and Rs2.7 trillion in the last quarter (April-June). With Rs5.8 trillion collected so far in the current fiscal year, achieving the June revenue collection target poses a significant challenge, especially given increased refund issuances per the Prime Minister’s directives.
