ISLAMABAD - The International Monetary Fund (IMF) has turned down the government’s request of reducing the tax collection target for the year fiscal year.

Talks between Pakistan and the IMF continued on the second day (Tuesday) in Islamabad. The IMF delegation had arrived Pakistan to review the economic situation in second quarter (October to December) of the current fiscal year before releasing third tranche worth of $450 million.

Officials informed that FBR officials have briefed the visiting delegation about tax collection. Pakistan has requested the Fund to further downward revise the tax collection target.

Tax collection shortfall had swelled to Rs383 billion in seven months’ period. The FBR has collected Rs2408 billion as compared to the actual target of Rs2791 billion and Rs2552 billion revised target. The IMF had already agreed with the government of Pakistan to downward revise the tax collection target to Rs5238 billion from original Rs5550 billion.

Pakistan wants to fix the tax collection target at around Rs4800 billion for the current fiscal year. FBR officials have informed that the government is unlikely to achieve the target due to the slowdown in economy. However, the IMF delegation has rejected the request by saying it had already reduced the target by Rs300 billion. The IMF has recommended the government to announce mini budget to increase the tax collection in remaining five months (February to June). FBR officials were of the view that mini budget would fuel the inflation rate in the country, which is already on the higher side. Pakistan Bureau of Statistics has recently revealed that inflation had recorded at 14.6 percent in January 2020— scaling the highest level in 12 years.

“Talks are still continue and final decision regarding mini budget will be announced after the approval of the prime minister,” said an official.

Technical level discussion to be followed policy level talks, which are expected to end on February 13 or 14. During the technical level discussions exchange of data would take place relating to revenue collection as well as energy sector reforms particularly with regard to circular debt and tariff adjustment and other reforms agreed under the programme.

Talks are expected to last for around two weeks. After completing its second review, the IMF would take decision to release $450 million to the Pakistani government. Pakistan had so far received $1.44 billion from IMF in two tranches. The IMF in July, 2019 had approved a 39-month extended arrangement under EFF for Pakistan for an amount of about $6 billion.