According to officials, a deal on the letter of intent (LoI) is likely to be reached before the weekend as Pakistan moves closer to finalizing its agreement with the International Monetary Fund (IMF) for the release of two tranches totaling $1.17 billion under a stalled loan facility.
According to senior officials at the finance ministry, the IMF is likely to deliver a LoI “anytime soon” given that the mission leader had to rush to Australia for a personal engagement.
The officials were quoted as saying, “We may obtain a LoI within the next 24 hours, and it would then be jointly signed by the Governor SBP and Minister for Finance Miftah Ismail.”
When contacted, the finance minister stated that the letter of intent would be sent out shortly to restart the IMF program by the end of the current month.
In the second week of July, an agreement at the staff level had been made between the IMF and Pakistan. The Fund’s board would examine the staff-level agreement at a meeting scheduled on August 24. The board will also consider about increasing a $6 billion program approved in 2019 by $1 billion.
According to a government official, the Pakistan Democratic Movement (PDM)-led government was forced to publish “a mini-budget to resurrect the stopped IMF programme” after bowing to retailer pressure and waiving a set fee that was scheduled to be collected through an electricity bill.
The government has decided to promulgate an ordinance to adopt additional taxing measures in order to raise Rs18 billion for the national coffers, the official said, adding that a mini-budget is in the works.
The government may impose higher taxes on cigarettes, tobacco leaves, fertilizer, and other items to appease the IMF. Additional levies are being considered for a variety of sectors. A presidential ordinance may increase the tax rates on tobacco leaf processing and cigarettes.
According to a different official, the government has in principle decided to raise an additional Rs12 billion from the tobacco industry by raising FED rates and an additional Rs6 billion by imposing a withholding tax on tobacco’s Green Leaf Threshing Process (GLTP), as the withholding tax in adjustable mode will be raised.
It is yet unclear how the government will modify the 2022 Finance Act through Presidential Ordinance, which will cost retailers Rs27 billion.
Also revealed by Finance Minister Miftah was the government’s plan to impose new taxes. The prime minister would shortly make a decision after considering several options, he said.
However, a source claimed that the proposed ordinance may allow the government to restore the tax exemption on benefits and privileges received by Pakistani diplomats. The source estimated that the revenue side will cost Rs1.5 billion.
Independent economists say there is more gap on the fiscal front as according to their estimates the government waived Rs31 billion tax on retailers and provided Rs30 billion supplementary grant to PSO (Pakistan State Oil) to avoid default.