Pakistan to revive stalled IMF programme within two days, claims Miftah Ismail

• Finance Minister Miftah Ismail "very hopeful" of  IMF programme's revival.
• Tax exemption for people earning Rs1.2m yearly to remain in place, he says.
• Miftah says once construction begins on empty lands, tax will be lifted.

ISLAMABAD: Federal Minister for Revenue and Finance Miftah Ismail said Monday that the stalled International Monetary Fund’s (IMF) Extended Fund Facility (EFF) would be revived within a day or two.

“I am very hopeful that the IMF programme will be revived,” the finance minister said while speaking to journalists as uncertainty over the revival of the fund’s programme has depreciated the rupee against the dollar.

The authorities in the finance ministry were expected to conclude the staff-level agreement by Sunday (June 19) on the basis of revenue and expenditure measures that could deliver next year’s primary budget — the difference between revenues and expenditures, excluding interest payment — in Rs152 billion surplus.

The Fund still has reservations over Rs9.5 trillion expenditures projected by the authorities for the next fiscal year. The revenue measures in the budget, according to IMF estimates, are also insufficient to deliver slightly over Rs7 trillion target.

The government took the toughest measures to end fuel subsidies and hiked the POL (petrol, oil, lubricants) prices up to unprecedented levels in order to convince the Fund to revive the programme. 

However, the IMF is still insisting on doing more knowingly that Islamabad has turned into a "desperate borrower" mainly owing to the depletion of foreign currency reserves.

The finance minister told journalists that the government aims at taxing the wealthy and providing relief to the poor through the budget for the fiscal year 2022-23.

“IMF has no relation with the increase in salaries. Also, the tax exemption to the people earning below 1.2 million [annually] will remain in place,” the finance minister said.

Taxes on property

Miftah, talking about the proposed taxes on property in Senate Standing Committee on Finance, said that once construction begins on an empty plot, it will be exempted from taxes.

“Lay one brick on the empty land and the taxes will be lifted. But we will not impose a tax on anyone who has not acquired the possession of a plot or has not received the permission to start construction on it,” he said.

The finance minister said if a person has been granted permission to start construction on a piece of land and they still do not begin building something on it, then they will have to pay the tax.

In the coalition government’s first budget, the finance minister proposed a 15% capital gains tax on immovable property for a one-year holding period, which will be reduced by 2.5% for every additional year.

Moreover, he has also proposed advance tax on filers to be increased to 2% from the previous 1% on the purchase of property and non-filers 5%.

Rupee continues slide

In line with market expectations, the Pakistani rupee sank further and crossed the 210-threshold against the US dollar in the interbank market during intra-day trade for the first time in the interbank market today.

The domestic currency closed at Rs209.96 against the greenback in the interbank market after losing Rs1.21, or 0.65%, according to the State Bank of Pakistan (SBP).

Economic experts have said that if Pakistan does not finalise the deal with the money lender, its currency will continue to depreciate against the dollar.

“The currency will continue to fall until Pakistan manages to strike a staff-level agreement with the International Monetary Fund (IMF),” AA Commodities Director Adnan Agar said while speaking to Geo.tv.

Exchange Companies Association of Pakistan (ECAP) Chairperson Malik Bostan identified a widening trade deficit, political instability, and declining foreign direct investment as major reasons behind the devaluation of the local currency.

“Political stability is key for economic development,” he said, adding that former prime minister Imran Khan’s call for another long march may adversely affect the rupee-dollar parity.

If the IMF deal is finalised, traders expect the rupee to settle within a range of 195-200 per dollar till the end of the outgoing fiscal year 2021-22.