The International Monetary Fund (IMF) and the government are expected to announce a staff-level agreement on Friday.
According to a local newspaper, the government has accepted most of the IMF’s demands which were termed unacceptable before. This will lead to the unfolding of an inflationary budget loaded with taxes on June 11.
According to sources in the Ministry of Finance, both sides will hold last round of talks today (Thursday) in which the remaining issues of the fiscal deficit and primary balance will be finalized.
It is expected that the loan size will be equal to about 225% of Pakistan’s quota or $6.5 billion.
Pakistan and the IMF have started exchanging the proposed draft of the Memorandum of Economic and Financial Policies that will become the base for the three-year program.
Pakistan already owes $5.8 billion to the IMF on account of previous loans. If all the issues are resolved by Thursday evening, Pakistan and the IMF will sign their 22nd programme on Friday.
Senator Faraz met IMF Mission Chief Ernesto Rigo along with three other legislators at the Parliament House.
They told the IMF official that the conditions set by the global lender for the new bailout package required new legislation and the PTI was not in a comfortable position to have these bills passed from both houses of the parliament.
The IMF mission chief highlighted the grave fiscal position of Pakistan and the privileges that various sectors enjoyed. The withdrawal of these tax concessions and privileges are among the conditions that Pakistan has accepted to secure the bailout package.
Where Pakistan is blamed for being a regular client of the IMF, there has also been criticism against the IMF for imposing conditions on the country that are not sustainable in the longer term. There are also apprehensions that because of the IMF’s tough conditions, the country might not be able to complete the programme.
Withdrawing of Tax Exemptions
According to the officials, the IMF and Pakistan agreed that the country would withdraw tax exemptions amounting to Rs 700 billion within two years.
The government will start withdrawing exemptions offered in various taxes amounting to around Rs 350 billion in the budget for 2019-20.
It has also been decided that the budget for the next fiscal year would be announced on June 11 as the Federal Board of Revenue (FBR) has expressed its inability to prepare tax proposals by May 22, which was the earlier date set for the budget announcement.
According to a senior official of the ministry, a summary has been sent to the prime minister for approving June 11 as the new date for unveiling the budget.