Islamabad (Pakistan), November 13 (ANI): The International Monetary Fund (IMF) is considering returning to a quarterly review process for Pakistan’s $7 billion bailout package, after some initial setbacks. However, Pakistani authorities said no final decision had yet been made.

A quarterly review would allow ongoing monitoring of the roughly 40 conditions outlined in the $7 billion deal. However, Pakistani negotiators informed The Express Tribune that a final decision has not yet been made on whether the exams will be conducted quarterly or bi-annually.

About six weeks ago, the IMF board approved the $7 billion deal and disbursed $1.1 billion as an upfront payment. The remaining $6 billion will be released in six equal installments, subject to successful completion of the biannual exams.

The first review was initially scheduled for March next year, but due to challenges related to fiscal policy, taxation and external financing, the IMF mission arrived earlier than expected. The previous Extended Financing Mechanism (EFF) under the 2019-2022 agreement also followed a quarterly review schedule.

According to some sources, quarterly reviews would allow the IMF to closely monitor government performance, thereby ensuring effective implementation. Additionally, these reviews would allow the Ministry of Finance to better oversee the 40 conditions set out in the agreement.

On Monday, the IMF mission received initial briefings from various ministries, while on Tuesday, mission head Nathan Porter held introductory discussions with Finance Minister Muhammad Aurangzeb and Governor of the State Bank of Pakistan (SBP ) Jameel Ahmad.

The new IMF Resident Representative in Pakistan, Mahir Bicini, also participated in the opening meeting. After the session, the Minister of Finance hosted a lunch in honor of the outgoing representative, Esther Pérez. However, the Ministry of Finance did not issue a press release following the first meeting.

The IMF has held several rounds of discussions on various issues, including the performance of the Federal Board of Revenue (FBR), accuracy of power sector data and progress in achieving macroeconomic goals. A key discussion also focused on the state of implementation of the national fiscal compact.

The FBR gave an overview of its performance for the first quarter, informing the IMF that the shortfall of Rs 90 billion over three months was due to inaccurate macroeconomic assumptions. The FBR said the failure to meet the monthly targets was due to slow growth in imports, slowing inflation and some policy measures that did not yield the expected results.

The FBR tried to assure the IMF that it had achieved the tax collection target of Rs 10 billion from traders, largely due to higher contributions from non-filing retailers. Even though these retailers pay a 2.5 percent withholding tax, they remain outside the broader tax system. However, the IMF target of Rs 10 billion was based on the Tajir Dost programme, which was missed by 99.99 per cent. The FBR informed the IMF that in the next phase it would focus on non-filing wholesalers to ensure that taxes due are collected from them, despite the benefits they derive from withholding tax rates. higher source imposed on non-filers. Finance Minister Aurangzeb has already announced the removal of the non-filers category.

The FBR also sought to assure the IMF that despite the revenue shortfall, it would still be able to achieve the 11.5 percent tax to GDP target due to the reduced size of the global economy. However, the total tax collection would be significantly lower than the target of Rs 12.97 trillion without the implementation of a mini-budget.

The FBR fiscal target of Rs 12.97 trillion was based on a nominal GDP growth assumption of 15 per cent, comprising 3 per cent real GDP growth and 12 per cent inflation. However, nominal GDP is now expected to grow by less than 12 percent, resulting in a smaller overall economy than initially expected.

Sources said the IMF did not reveal whether it agreed with the FBR’s reasoning or would continue to insist on the implementation of a mini-budget, as promised by the government of Prime Minister Shehbaz Sharif in September.

The IMF has raised concerns over low collections in the real estate sector, despite significant increases in withholding tax rates on the sale and purchase of land. He also received a briefing on the National Fiscal Compact and acknowledged the challenges faced in ensuring its smooth implementation.

The four provincial governments have yet to approve farm income tax laws, which aim to increase the tax rate to 45 percent. Due to delays in Punjab, the overall cash surplus target was not achieved. Sources suggested that the IMF could offer technical assistance to help fully implement the National Fiscal Compact, which aims to transfer spending responsibilities to the provinces, in line with the constitutional framework. (ANI)

This report is automatically generated from the ANI news service. ThePrint assumes no responsibility for its content.