Pakistan to kick-start virtual talks with IMF from Monday

• Official says if issues are resolved, deal will be finalised in 7-15 days.
• Govt shares basic contours of upcoming round of talks with IMF mission chief.
  
• Pakistan agrees to devise a mechanism for introducing single exchange rate.
  

ISLAMABAD: In line with its plan to convince the International Monetary Fund (IMF) to complete the pending ninth review, Pakistan shared the basic contours of negotiations with the high-ups of the multilateral institution with the expectation that both sides will kick-start virtual talks from next week.

A senior official of the Finance Division told The News that an email has been sent to the IMF and "we are waiting for their response."

While virtual talks are expected to kick-start on Monday it is not yet known whether the upcoming talks will be formal or informal in nature. If formal talks begin, it will be a significant development as informal talks had continued during the last two and a half months. 

One top official of the Finance Division also confirmed to The News that the government has shared the basic contours of the upcoming round of talks with the IMF Mission Chief Nathan Porter. 

It was learnt that the two sides discussed matters regarding:

• Fiscal consolidation, including taking additional taxation measures and curtailing expenditures to restrict the budget deficit within the envisaged limit agreed with the IMF
• Taking all required corrective measures to devise a sustainable roadmap for cash bleeding energy sector such as curtailing flow and stocks of the circular debt, hiking tariffs of electricity and gas sectors 
• Bringing the exchange rate aligned to the free market mechanism

The official further added that the IMF’s mission chief informed Pakistan about their readiness to hold virtual talks next week, and the review mission could also visit Pakistan if needed. 

“If all thorny issues are resolved in virtual meetings, then the staff-level agreement might be struck without paying a physical visit in the next seven to 15 days,” the top official said.

The source revealed that the IMF had already communicated to Islamabad to develop an agreement on the Memorandum of Financial Policies (MEFP) for striking a staff-level agreement. 

"If the IMF mission paid a visit and the talks remained inconclusive, it would be more damaging to the economy," he said, adding that Pakistan might start talks from coming Monday so that both sides can evolve a consensus on the MEFP document.

Pakistan ready to introduce single exchange rate

As the Fund is unlikely to allow multiple exchange rates, Pakistan has now agreed in discussions with the IMF staff that they will be ready to devise a mechanism for introducing a single exchange rate regime based on the pattern of free float and market-based rate. 

The additional taxation will be another area of upcoming talks with the IMF for restricting the budget deficit within the desired limit. The Pakistani side will request the IMF for slashing the Petroleum Development Levy (PDL) target of Rs855 billion with the argument that it would make efforts to collect a maximum of Rs50 per litre on POL products in the remaining five months of the current fiscal year. 

Regarding the Federal Board of Revenue's (FBR) tax collection target of Rs7,470 billion, it would remain intact while the revenue board officials argued that it was a mistake to seek the highest-ever tax collection for December 2022 when the FBR missed it with the margin of Rs225 billion.

The Inland Revenue Service, which deals with major taxation including income tax, sales tax and federal excise duty, has expressed its readiness to recover Rs20 to Rs30 billion every month in the remaining period of the current fiscal year. 

However, the FBR will face a shortfall of Rs170 billion on customs duty collection in the wake of import compression.