ISLAMABAD: The International Monetary Fund (IMF) has serious concerns about the recently announced package for the agriculture sector and the subsidy for discounted electricity for export-oriented sectors as the international lender asked the government to either reverse both decisions or compensate through new tax measures (mini-budget), Business Recorder revealed on Monday.
Talks on the IMF’s Ninth Review, which will soon begin, will cover these stringent measures.
Recently, the government proposed a financial package worth Rs1800 billion for farmers and the provision of electricity to five export-oriented industries at a cost of Rs19.99 per kWh, or an estimated Rs110 billion.
“Reverse or compensate with new tax measures the losses of recently introduced measures (agricultural subsidies, exporter subsidies and power sector delays),” Business Recorder revealed quoting IMF sources.
The government is also prohibited from enacting any new tax amnesties, exemptions, or other favorable tax treatment.
After major slippages in FY 22, the paper claims that the government is required by the Ninth Review to resume needed consolidation in order to attain the primary surplus objective of 0.3% of GDP in FY 23.
All new spending plans for FY 23, particularly those required to address the floods, must be understood clearly in this regard. In order to reach program targets, compensatory budgetary measures must also be agreed upon. These actions could involve increased taxation or expenditure priorities.
In the seventh and eighth reviews, there were revenue contingency measures that could be activated if there was even a one-month income shortfall.
The government must complete the October PDL adjustment that was delayed and adhere to all committed following hikes in order to generate revenue of 1% of GDP, according to the sources, in order to improve the revenue base and raise the tax-to-GDP revenue to at least 11%.
The IMF reportedly urged the government to strengthen energy sector viability by timely implementation of electricity tariff increases (both quarterly adjustments and monthly FCAs).
Furthermore, the Fund reportedly asked the government to seek Cabinet approval of FY 23 Circular Debt Management Plan (CDMP), to guide a sustainable reduction in circular debt accumulation as agreed with the World Bank (WB), Asian Development Bank (ADB) and IMF.
