IMF puts tough conditions to bailout Pakistan

KARACHI: The International Monetary Fund (IMF) has asked Pakistan to take additional tax measures for curtailing the budget deficit as well as advocated free movement of Pak Rupee, which could push one US dollar to Rs150.

IMF has asked Pakistan to let market forces decide the fate of the Pak Rupee and go for a total free-float of the exchange rate, which the finance ministry is reluctant to accept due to its adverse implications for the economy. The IMF is also demanding more autonomy for the central bank.

Finance Minister Asad Umar has said it is still in Pakistan’s interest to enter into a program with the International Monetary Fund (IMF) to stabilize its economy, despite the agreements for financial assistance with other countries.

Pakistan’s debt level is likely to remain high in near future even if consolidation efforts go as planned, warns the International Monetary Fund (IMF) in its latest Regional Economic Outlook.

The IMF has assessed that the FBR was going to face massive revenue shortfall, so the government will have to take additional tax measures to avoid slippages on fiscal fronts.

One of the biggest demands of the IMF is on front of jacking up the GST rate from standard rate of 17 percent to 18 percent as alone this step can fetch over Rs75 billion into the national kitty in one year.

As the five months had already passed, so its impact for the remaining period will reduce accordingly. The PTI-led government does not have any other option but to seek the IMF package to stabilize the economy on short to medium term basis.

The IMF is scheduled to conclude the ongoing talks till November 20, 2018, but there are chances that the Fund mission might increase its stay in Islamabad to finalize modalities of the bailout package.

The IMF has asked Pakistan to explore all options on direct and indirect tax sides for generating the desired revenues for fetching additional Rs175 to Rs200 billion to fill the gap. The option of raising the GST rate by one percent from 17 to 18 percent is also under consideration but the Ministry of Finance and FBR are opposing it on the basis of higher inflationary impact.

Meanwhile, the provinces have unanimously told the International Monetary Fund (IMF) that they would oppose any structural change in the National Finance Commission (NFC) award. However, they assured the fund of providing Rs286 billion cash surpluses to help the Centre achieve its fiscal targets, Express Tribune reported.

In this regard, the IMF team held a meeting with the four federating units’ officials to get to know their fiscal policies under its bailout program. The provincial finance ministers and secretaries attended the meeting held on Friday. Discussions took place on the distribution of resources under the NFC award and provincial budgets.

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