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.