Tag: IMF

No deadlock in Pakistan, IMF talks: spokesman

ISLAMABAD: The ministry of finance on Sunday rejected a news story regarding failure of talks between Pakistan and the International Monetary Fund (IMF), said there was not any deadlock with the IMF.

Finance ministry spokesman Muzammil Aslam, in a statement, said that there was not truth in news about the deadlock, adding that the talks would resume from Monday (tomorrow) and would continue uninterrupted as per schedule.

Aslam said the date for ending talks was not fixed and the negotiation would continue till success of the talks.

He said Minister for Finance Shaukat Tarin and Governor State Bank of Pakistan Reza Baqir were attending meetings in New York while the Secretary Finance and his team were engaged for talks in Washington DC as per schedule.

IMF starts distributing largest ever $650 billion allocation

October 18, 2021
GST exemption on various goods may be withdrawn

Pakistan’s Federal Board of Revenue is likely to withdraw exemption and concession of general sales tax (GST) granted on many consumable items.

The consumption tax may be withdrawan on the supply of goods to generate an estimated revenue of Rs334 billion, news reports suggested.

The exemption of GST may be withdrawn on supplies of various local and imported goods. The exemption and concession of consumption tax may continue on basic food items.

The report suggested that Personal Income Tax (PIT), there are 11 slabs and one proposal under consideration is to bring down slabs to 6 or 7 where the minimum taxable ceiling of Rs0.6 million might be adjusted upward while the rate of higher-income brackets might be increased.

The hike in power tariff to the tune of Rs1.40 per unit might be notified after the agreement with the IMF.

Federal Minister for Finance Shaukat Tarin is expected to hold a meeting with the IMF’s Managing Director (MD) Kristalina Georgieva on October 15, 2021 in Washington, DC. However, things are still unclear whether Pakistan and the IMF will be able to strike a staff-level agreement or not. The review talks may be extended if both sides remained unable to strike any staff-level agreement on the completion of the sixth and seventh reviews under the $6 billion Extended Fund Facility (EFF).

Sources said that the IMF was advising stringent taxation measures but Pakistani authorities were making last-ditch efforts to convince the IMF for delaying taxation measures on account of withdrawal of sales tax exemptions and adjustment into Personal Income Tax till the announcement of the next budget 2022-23 or implementation of these steps in a staggered manner.

October 15, 2021
IMF starts distributing largest ever $650 billion allocation

Washington, DC: International Monetary Fund (IMF) on Monday started distribution of the largest ever allocation of $650 billion to provide additional liquidity to the global economic system.

Ms. Kristalina Georgieva, Managing Director of the IMF made the following statement on Monday:

“The largest allocation of Special Drawing Rights (SDRs) in history—about US$650 billion—comes into effect today. The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis.

“The SDR allocation will provide additional liquidity to the global economic system – supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt. Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis.

“SDRs are being distributed to countries in proportion to their quota shares in the IMF. This means about US$275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion – equivalent to as much as 6 percent of GDP in some cases.

“SDRs are a precious resource and the decision on how best to use them rests with our member countries. For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed.

“To support countries, and help ensure transparency and accountability, the IMF is providing a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability. The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years’ time.

“To magnify the benefits of this allocation, the IMF is encouraging voluntary channeling of some SDRs from countries with strong external positions to countries most in need. Over the past 16 months, some members have already pledged to lend US$24bn, including US$15 billion from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust, which provides concessional loans to low-income countries. This is just a start, and the IMF will continue to work with our members to build on this effort.

“The IMF is also engaging with its member countries on the possibility of a new Resilience and Sustainability Trust, which could use channeled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges. Another possibility could be to channel SDRs to support lending by multilateral development banks.

“This SDR allocation is a critical component of the IMF’s broader effort to support countries through the pandemic, which includes: US$117 billion in new financing for 85 countries; debt service relief for 29 low-income countries; and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.”

IMF projects Pakistan’s GDP growth at 5pc in FY24

August 23, 2021
Rupee makes 42 paisas gain against dollar

KARACHI: The Pak Rupee (PKR) made a gain of 42 paisas against the dollar on Wednesday after witnessing deterioration in first two days of the week.

The rupee ended Rs163.47 to the dollar from previous day’s closing of Rs163.89 in the interbank foreign exchange market.

The local currency lost Rs1.46 against the dollar during first two days of the current week. So far the rupee lost around 5.93 against the dollar from the closing of June 30, 2021.

Currency experts said that the rupee gained on reports of funds allocations of $650 billion by the International Monetary Fund (IMF) to boost global economy. Pakistan will get around $2.8 billion out of this allocation.

The experts said that encouraging inflows of exports and workers’ remittances would help the rupee to make gain in coming days.

However, they said the payment against external debt may put pressure on the local currency.

August 4, 2021
Rupee weakens by 22 paisas in interbank

KARACHI: The Pak Rupee (PKR) ended down by 22 paisas against the dollar on Tuesday as demand for external payment remained high.

The rupee ended at Rs163.89 to the dollar from previous day’s closing of Rs163.67 in the interbank foreign exchange market.

Currency experts said that the external payment had put pressure on the local currency.

However, they said that the pressure would ease in coming days as recent pledge of the International Monetary Fund (IMF) for providing $650 billion to boost global liquidity.

The experts said that Pakistan would also get around $2.8 billion under this allocation by month end.

The local currency fell to Rs164 in intraday trading in the interbank foreign exchange market. However, it made some recovery later in the day.

August 3, 2021
FBR projects Rs5,700bn tax collection for next fiscal year; IMF says ‘do more’

ISLAMABAD: The Federal Board of Revenue (FBR) has estimated Rs5,700 billion as a net revenue collection for the next fiscal year 2021/2022, around Rs263 billion less then projection of International Monetary Fund (IMF).
(more…)

May 28, 2021
Finance ministry, IMF meeting to finalize budget proposals

ISLAMABAD: An important meeting of the ministry of finance with representatives of International Monetary Fund (IMF) will be held today evening (Thursday evening) to finalize the recommendations for budget 2021/2022.

Senior officials of the ministry of finance, three representatives, including country head, of IMF and senior officials of Federal Board of Revenue (FBR) will attend the meeting, sources said.

Officials of the IMF will attend the meeting through video link.

The meeting will discuss important points of the budget, which will include salary income tax and sales tax reforms.

The sources said that the meeting would finalize tax slabs for salaried persons.

The IMF had proposed reduction in salary tax slabs from 11 to five. Further the meeting will discuss sales tax incentives and reduced rates.

The sources said that the government would finalize the proposals after discussions with the IMF.

The source said that the government is considering an increase of 10 percent in salaries and pension. This increase would be given through adhoc basis. However, the government is not considering to grant the increase in basic pay scale.

The government has decided to allocate an amount of Rs900 billion for Public Sector Development Program (PSDP). The budget deficit may be curtailed at six percent of the GDP.

In his recent statement, Finance Minister Shaukat Tarin had already made it clear that the government was not in position to take strict measures due to covid pandemic.

May 27, 2021
Parliament to approve amendments to SBP Act by September

KARACHI: The National Assembly likely to adopt amendments to State Bank of Pakistan (SBP) Act by September 2021.

This was assured by the Pakistani authorities to International Monetary Fund (IMF).

The ministry of finance submitted the amendments to parliament in March 2021 and the authorities expect adoption by parliament by end-September 2021.

The authorities assured the IMF about making good progress toward strengthening the SBP’s autonomy, governance, and mandate.

The authorities said: “We have worked closely with IMF staff in the preparation of amendments to the SBP Act to address existing gaps.”

The amendments aim to:

(i) establish domestic price stability as the primary objective, with financial stability and growth as secondary objectives;

(ii) clearly define the SBP’s functions to help achieve these objectives;

(iii) strengthen the SBP’s financial autonomy, including through statutory mechanisms for sufficient recapitalization and profit retention; (iv) prohibit the extension of direct credits or guarantees to the general government;

(v) establish the statutory underpinnings for audits;

(vi) secure stronger protection of the personal autonomy of senior officials;

(vii) further strengthen collegial decision making at the executive management level;

(viii) provide stronger oversight by the Board; and

(ix) improve SBP’s accountability regarding the conduct of its monetary policy and the achievement of its objectives.

April 15, 2021
Harmonization of sales tax to complete by June

ISLAMABAD: Harmonization of sales tax between federal and provincial tax authorities may be completed by end-June 2021, officials in the Federal Board of Revenue (FBR) said on Wednesday.

The FBR said that the authorities were in the process of harmonizing the service sales tax across provincial jurisdictions, with support from the World Bank, which will be completed by end-June 2021.

The officials said that the government had shown commitment to the International Monetary Fund (IMF) of taking several measures including broadening of sales tax base.

The government has committed to reforms the General Sales Tax (GST) system, underpinned by a unified tax base and within the confines of the current constitution.

The authorities will: (i) eliminate all zero-rated goods (Fifth Schedule), except on export and capital machinery goods and move them to the standard sales tax rate; (ii) remove reduced rates under the Eight Schedule and bring all those goods to the standard sales tax rate; (iii) eliminate exemptions (Sixth Schedule) excluding a small subset of goods (i.e., basic food, medicines, live animals for human consumption, education and health-related goods) and bring all others to the standard rate; and (iv) remove the Ninth Schedule to replace a specific tax rate for cell phones with the standard rate.

These reforms are expected to yield an estimated 0.7 percent of GDP on an annualized basis.

Moreover, the authorities are also in the process of harmonizing the service sales tax across provincial jurisdictions, with support from the World Bank, expected to be completed by end-June 2021.

April 14, 2021
Salary income tax brackets to be reduced to five

KARACHI: The government is working on reducing the brackets of salary income tax to five from existing 11 besides reducing the income slabs, according to country report on Pakistan issued by International Monetary Fund (IMF) on Thursday.

Pakistan has assured the IMF to take major initiatives in the upcoming budget 2021/2022. According to the report the Pakistani authorities assured the IMF that in the next step of tax policy reform efforts and to further support fiscal objectives, the government will introduce both a general sales tax (GST) and a personal income tax (PIT) reform with the FY 2022 budget, yielding an estimated 1.1 percent of GDP.

The government may introduce change the existing tax rate structure by reducing the number of rates and income tax brackets from eleven to five and decreasing the size of the income slabs, with a view to simplifying the system and increasing progressivity.

The authorities further pledged to reduce tax credits and allowances by 50 percent (except for Zakat and those provided for disabled and senior citizens).

Besides, they also pledged to introduce a special tax procedure for very small taxpayers, aimed at preventing further tax base erosion and facilitating the formalization of the economy.

The authorities may adopt a long-term strategy to reduce labor informality and to bring additional taxpayers into the PIT net. This reform is expected to yield 0.4 percent of GDP on an annualized basis.

For the broadening and harmonizing the General Sales Tax (GST) base, the authorities assured the IMF through its Letter of Intent (LoI) signed by the finance minister and governor State Bank of Pakistan (SBP) that the government will advance the reforms to our GST system, underpinned by a unified tax base and within the confines of the current constitution.

The authorities pledged the following:

(i) to eliminate all zero-rated goods (Fifth Schedule), except on export and capital machinery goods and move them to the standard sales tax rate;

(ii) remove reduced rates under the Eight Schedule and bring all those goods to the standard sales tax rate;

(iii) eliminate exemptions (Sixth Schedule) excluding a small subset of goods (i.e., basic food, medicines, live animals for human consumption, education and health-related goods) and bring all others to the standard rate; and

(iv) remove the Ninth Schedule to replace a specific tax rate for cell phones with the standard rate. These reforms are expected to yield an estimated 0.7 percent of GDP on an annualized basis.

Moreover, the government is also in the process of harmonizing the service sales tax across provincial jurisdictions, with support from the World Bank, expected to be completed by end-June 2021.

April 9, 2021