• Wrap-up meeting today to finalise letter of intent, MEFP
• Both sides agree on contingency measures to address data gaps
ISLAMABAD: With an apparent understanding reached during the final review of the $3 billion Standby Arrangement, the visiting staff mission of the International Monetary Fund (IMF) and Pakistani authorities agreed on Monday to extend talks overnight to conclude the Memorandum of Economic and Financial Policies (MEFP).
The finance ministry had earlier announced the schedule of review talks ending on March 18. However, informed sources said that the two sides had hectic sector-wise meetings, which were impacted by reduced working hours due to Ramazan, thus spilling a couple of agenda items over to Tuesday (today).
The final wrap-up meeting, customarily represented by the finance minister, will now take place on Tuesday and the letter of intent (LoI) and MEFP on behalf of the minister and the governor of central bank will be finalised the same day. “Most of the work on the documentation is already complete,” an informed source said.
The sources told Dawn that the two sides had agreed on a set of contingency measures to address gaps in data in case of any slippages for the period ending March 31. The two sides would remain in contact on a timely basis in the run-up to presentation of Pakistan’s case to the Fund’s executive board for approval to the disbursement of final tranche of about $1.1bn in the first part of April. Pakistan has already received $1.9bn out of the $3bn SBA signed in July last year.
The two sides on Monday had detailed discussions on upgrading the Anti-Money Laundering (AML) and the Combating the Financing of Terror (CFT) laws in line with best international practices as advised by the Financial Action Task Force (FATF). These meetings, attended by FBR, SBP, SECP, and other stakeholders, also covered the secrecy safeguards pertaining to access of banks data to assets documentation of public officials.
The sources said the banks would be bound to share data with FBR, but there would be standard protocols as to who could, to what extent, and in what format the data could be accessed to avoid its public disclosure. There would also be certain exemptions related to specific ‘holy offices’, but these exemptions would be limited to a few.
Officials also hinted at increasing the rate of petroleum development levy on sale of major oil products from the existing rate of Rs60 and the upper limit of Rs100 per litre may be provided for in the finance bill 2025, instead of any consideration for GST that mostly goes to the provinces.
The sources said Pakistan has shared with the IMF mission a detail plan regarding a complete freeze on electricity and gas sector circular debt. The base electricity tariff would be revised with effect from July 1, 2024 in a manner that consumers would face predictable monthly fuel costs and quarterly adjustments, and start scaling down the outstanding circular debt, which stands at over Rs3 trillion, including Rs2.3trillion of fresh stock and over Rs700bn parked in Power Holding Company.
Similarly, the consumer-end gas tariff would also be revised upward effective from July 1, 2024, for which the regulatory process would be completed well ahead of the deadline. The schedule of tariff adjustments, both in the gas and power sectors, would be strictly followed, and this would also become part of the next ‘longer and larger’ programme with the IMF to be finalised on the sidelines of the April 15-20 spring meetings of the World Bank and the IMF.
The sources stated that the government has already shared with the fund mission the FBR’s digitalisation programme and has expressed its commitment to improving the tax system for the real estate sector.
For this purpose, and for the effective regulation of both the retail and wholesale sectors, related legislation and subordinate legislation will be included in the upcoming federal budget, harmonised with the provinces. Retailers will also be brought into the tax net through compulsory registration.
Alongside, the tax rates for non-filers in real estate transactions would be substantially and prohibitively increased and all the real estate societies and housing authorities would be registered with the relevant revenue authorities. Their transactions would be monitored on a pattern of points of sale (POS) network of retail sector and through the banking instruments.
In a related meeting, Sardar Awais Ahmad Khan Leghari, who was reassigned the ministerial portfolio for Power Division said in a statement that “circular debt has mounted to Rs3 trillion with an annual addition of approximately 700bn to 800bn, which adversely affects the economy of the country”. With unwavering determination, he is committed to undertaking every possible measure aimed at controlling circular debt and mitigating inefficiencies plaguing the power sector, hindering its progress, said the statement.
Published in Dawn, March 19th, 2024
