During talks, IMF team to review Pakistan’s loan programme for release of final $1.1b tranche of $3b bailout n Aurangzeb says documentation of economy, end to end digitisation of tax system top priorities.

ISLAMABAD  -  Federal Minister for Finance and Revenue Muhammad Aurangzeb said Wednesday that the government is con­sidering to broaden the tax base by incorporat­ing wholesale/retail, real estate, and agri­culture sectors into the tax framework as talks between Pakistan and International Monetary Fund (IMF) for the sec­ond review of Stand-By Arrangement (SBA) is most likely to begin to­day (Thursday).

Pakistan has already received two tranches worth of $1.9 billion under the Stand-By Ar­rangement from the IMF. The talks for the remaining last tranche worth of $1.1 billion are scheduled from 14th to 18th March 2024 in Islamabad. “Pakistan has met all Structural Benchmarks, Qualita­tive Performance Cri­teria and Indicative Targets for successful completion of the IMF review. This would be final review of SBA, and staff level agreement is expected after this ap­praisal,” said ministry of finance on Wednes­day. It added that once Staff level agreement is reached, final tranche of USD 1.1 billion will be disbursed, following the approval of Executive Board of IMF.

Aurangzeb also said that documentation of economy and end to end digitisation of tax sys­tem is the top priorities of the government. The finance minister visited Federal Board of Rev­enue (FBR) Headquar­ters and held introduc­tory meeting with its members to discuss the board’s performance and future initiatives. 

The minister stressed the urgent need for digi­tizing the FBR to enhance transparency and efficien­cy in tax collection. These initiatives would focus on enhancing tax collection through improved FBR governance, comprehen­sive documentation of the economy, and full-scale digitiza­tion. “The government is con­sidering strategies to broaden the tax base by incorporating wholesale/retail, real estate, and agriculture sectors into the tax framework,” he said. Au­rangzeb said that digitization is a means to an end and imple­menting digital solutions are pivotal to modernizing our tax administration. 

He said that by leverag­ing technology and enhancing transparency, a more equitable tax system could be developed that fosters economic growth and benefits all citizens.

The meeting concluded with a firm commitment from both sides to work towards pro­moting the welfare of the Pakistani people. Minister Aurangzeb praised the ded­ication of the FBR team and pledged the government’s full support in implement­ing transformative measures. The minister’s visit to the FBR headquarters underscores the government’s dedica­tion to strengthen fiscal gov­ernance and promoting eco­nomic prosperity in Pakistan, the statement added.

In a strange co-incidence, the IMF programme was designed in a way that each of three gov­ernments including PDM, care­taker and new government, each would receive one tranche from the Fund in the nine-month programme. 

Finance Minister Muham­mad Aurangzeb has already directed the concerned of­ficials to approach the IMF for starting talks for the new loan programme. The govern­ment would negotiate a “lon­ger and larger” economic bail­out package with the IMF. “We would be very keen to start discussions on another EFF (Extended Fund Facility) with them” during these talks, he said during the recent talk with the media. During these talks, “we would at least kick-start the process and get this going. Let us see how they re­spond,” he said, hoping that the two sides would discuss the blueprint of the next pro­gramme in April.

The government has restrict­ed the circular debt of the pow­er and gas sectors, which were main requirements of the IMF. The government has massive­ly increased the gas prices in February on the direction of the IMF. In the fiscal sector, the government has controlled the budget deficit, according to the official. However, the Federal Board of Revenue (FBR)’s tax collection had faced a short­fall in the second consecu­tive month in February. The tax collection target for the month of February 2024 was set at Rs714 billion. Keeping in view the monthly collection of Rs681 billion during Febru­ary 2024, the monthly short­fall has increased to Rs33 bil­lion. In January 2024, the FBR had suffered a shortfall of Rs9 billion. According to a tweet of the FBR, the FBR has sur­passed an eight-month target of Rs5,829 billion and regis­tered a growth of 30 per cent. During February 2024, the FBR collected Rs681 billion against Rs519 billion collected during February 2023, registering a growth of 32 per cent.