Pakistan is getting closer to raeaching a staff-level agreement with the International Monetary Fund (IMF) after weeks of painful negotiations. The negotiations have brought Islamabad closer to the revival of the stalled $6bn Fund programme. The signs of positive negotiations are being seen in Pakistan, PSX has boosted, after continued appreciation, the US dollar has started losing its value against the rupee and the banks of China have also signed a loan agreement of $2.3 billion with Pakistan.
There have been conditions, of course: the government has consented to impose additional taxes of Rs436bn, gradually implement a petroleum levy of up to Rs50 a litre, besides rolling back some fiscally irresponsible measures proposed in the original budget 2022-23.
The changes in the proposed budget to be passed by parliament will help the government target the primary budget surplus of Rs152bn and overall fiscal deficit of 4.9pc of GDP. That makes the FBR’s job a little more challenging, with its enhanced tax collection target of Rs7.4tr requiring a growth of 24pc.
On its part, the IMF has stepped back from its demand to impose a petroleum levy of Rs30 a litre in one go and has foregone 10.7pc sales tax on petrol and diesel.
Once the ‘prior actions’ are executed through changes in the proposed budget, and monetary targets finalised with the State Bank, the staff-level agreement will be approved by the IMF and the nearly $1bn stuck-up tranche released.
Pakistani authorities hope the Fund will increase the size of the bailout package to $8bn and extend its duration to June 2023. Recently, Prime Minister Shehbaz Sharif has also hoped that the agreement with IMF will be secured soon as the conditions of the fund have been already met.
There is no way the inflation-stricken low- to middle-income households, already crushed by massive fuel price increases and bracing themselves for an enormous surge in power and gas rates from next month, will escape the impact of additional taxation.
Thus, it is the need of the hour that when the agreement with the IMF is finalised, the authorities here must make deep structural changes for long-term sustainable growth to protect the people from repeated economic busts and future global shocks.
