The International Monetary Fund (IMF) has urged Pakistan to share the draft of its forthcoming investment policy and ensure transparency in the operations of the Special Investment Facilitation Council (SIFC), given the anticipated CPI-based inflation at an average rate of 12.7% for the next budget year, 2024-25.
Additionally, the IMF has inquired about the tax exemptions provided by the government for the upcoming Special Economic Zones (SEZs) under the China-Pakistan Economic Corridor (CPEC).
The IMF is advocating for the maximization of non-tax revenues, suggesting an increase in the Petroleum Development Levy (PDL) or the implementation of a Carbon levy to offset the zero rate of GST on petroleum products. The organization has recommended imposing an 18% GST on petrol and diesel alongside the PDL.
However, discussions between the IMF and Pakistani authorities have not transitioned into formal negotiations for a fresh bailout package under the medium Extended Fund Facility (EFF).
There are differences in macroeconomic outlook between the IMF and Pakistan’s Ministry of Finance for the next fiscal year, with the IMF projecting a real GDP growth rate of 3.5% and CPI-based inflation at 12.7%. In contrast, the Ministry of Finance envisions a GDP growth rate of 3.7 to 4% and inflation averaging between 11 to 12%.
The IMF has estimated debt servicing at Rs9.787 trillion for the next fiscal year, while the Ministry of Finance is working on finalizing the total debt servicing figures based on the primary surplus generated.
Regarding the SIFC, Pakistan assured the IMF of the ongoing preparation of a new investment policy. The IMF emphasized the importance of transparency in the operations of the SIFC and inquired about potential investments in various projects, including the privatization of Pakistan International Airlines (PIA) and other State-Owned Enterprises (SOEs).
Regarding tax exemptions for the upcoming SEZs under CPEC, the Board of Investment stated that over two dozen SEZs were in the pipeline, with four new additions. The government plans to provide similar tax incentives to these SEZs as to others, with the upcoming investment policy focusing on SEZs.
Despite no formal negotiations yet, the Finance Division remains optimistic about clinching an IMF deal after the budget announcement and parliamentary approval, based on ongoing engagements with the IMF team.
