January 25, 2023 (MLN): In a significant development, Pakistan on Tuesday shared a draft of a mini-budget with the International Monetary Fund (IMF) as part of efforts to complete the ninth review of the $7 billion Extended Fund Facility (EFF).
The mini-budget includes all the requirements needed to complete the review.
During virtual talks, the Pakistan side also requested the fund to send a mission to Pakistan to complete the review. The Ministry of Finance has assured that Pakistan will comply with all the conditions before the mission’s arrival, according to sources.
However, IMF officials have stated that the date of the mission’s visit to Pakistan will be decided after compliance with all conditions.
As a result, the first round of virtual talks between Pakistan and the IMF was inconclusive. The next round of talks is expected to take place soon as both sides aim to reach an agreement on the completion of the ninth review.
IMF has instructed Pakistan to gradually increase the levy on petroleum products and eliminate subsidies on gas and electricity as part of its mini-budget proposal, according to sources.
The government plans to implement a windfall levy on banks, increase electricity prices by Rs7.5 per unit, and gas prices by 74% through the mini-budget while the federal excise duty on cigarettes, drinks, and luxury items will be increased. in addition, the government will impose a tax worth Rs70 billion on different items. Also, a withholding tax will be applied on the daily bank transaction of more than Rs50,000.
In order to execute the aforementioned compliances, the summary will be submitted in the next Economic Coordination Committee (ECC) meeting.
The move is aimed at reducing the country’s fiscal deficit and stabilizing the economy. The government has been under pressure from the IMF to take measures to improve its fiscal position, which has been hit by low growth, high inflation, and a balance of payments crisis.
