IMF mission extends stay as consensus eludes on staff level agreement

• IMF and govt at odds on retailers’ scheme. 
• FBR wants to bring in scheme in next budget.
• FBR faces daunting task of meeting Rs9.4tr tax collection target.

ISLAMABAD: The International Monetary Fund (IMF) review mission has extended its stay in Pakistan by a day as both sides have been unable to develop a consensus on a staff level agreement for the second review and release of the third tranche worth $1.1 billion under the Stand By Arrangement (SBA), reported The News on Tuesday.

The lender is seeking assurance from Prime Minister Shehbaz Sharif before striking the deal on issues such as hiking the electricity and gas tariffs from July 1 as well as raising quarterly tariff adjustment and making adjustments under fuel price adjustments.

The News had asked the Ministry of Finance regarding the extension of the IMF team’s stay but it did not receive a response till the report was filed.

As per the publication, the provinces have agreed to collect a revenue surplus of Rs600 billion but so far it remained one of the problematic areas so there might be adjustments to strike a consensus on finalising the Memorandum of Economic and Financial Policies (MEFP).

Another issue where the IMF and the government are at odds is the retailers’ scheme, the Federal Board of Revenue (FBR) is trying to convince the lender to launch the scheme in the next budget as it would need more effort and would not have any major impact on the revenue collection if implemented right now.

However, it remains to be seen how the IMF would adjust the retailers’ scheme in the staff level agreement which would lead to the release of the $1.1 billion tranche.

The IMF has re-adjusted monthly revenue collection targets with the hope that the FBR will materialise its desired tax collection target of Rs9,415 billion on June 30, 2024.

Pakistan may also inform the IMF mission about its plans to seek a long- term bailout package under Extended Fund Facility (EFF) programme. The communication would be verbal right now but Islamabad is likely to submit its application to the IMF during the annual spring meetings of IMF/World Bank scheduled to be held from April 15 to 20.

Finance Minister Muhammad Aurangzeb will lead the Pakistani delegation that will be participating in the meeting from April 17 to 20.

“There is no scheduled meeting with relevant ministries and departments on Tuesday but the draft Memorandum of Financial and Economic Policies (MEFP) will be discussed with Ministry of Finance and finalised for striking a staff level agreement on Tuesday (today),” sources told The News.

The timeframe does not allow both sides to linger on talks for striking a staff level agreement because the existing SBA will expire on April 12, 2024.

For the FBR to meet its target Rs9.4 trillion at the end of the ongoing fiscal, the tax collecting authority will have to collect Rs879 billion in March while in the last quarter (April-June) it would need to collect Rs2.7 trillion.

The FBR has, so far, collected Rs5.8 trillion in the eight months of the current fiscal year.

On the directives of PM, the tax collecting authority had issued more refunds so it will be really challenging to materialise the revenue collection target for June.