IMF demands ‘do more’,
World Bank sets four
conditions for $350 loan

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LAHORE: Pakistan should not be limited to taking measures related to tax alone, but it should also find other ways to enhance the competitiveness of the economy, said IMF’s Resident Representative Ms Esther Perez Ruiz.

IMF’s Resident Representative Ms Esther Perez Ruiz

Speaking to the office-bearers of the Lahore Chamber of Commerce and Industry on Tuesday, she said the purpose of the IMF programme is to promote macroeconomic stability and the country’s fiscal and monetary policies must promote the former’s vision in this regard.

She said the IMF programme’s aim is to bring a set of policies that could promote sustainable and inclusive growth. She maintained that since the country’s tax-to-GDP ratio is very low, the purpose of eliminating sales tax exemptions to the industry through the recent finance bill is to reduce the complexity in the taxation system.

“We want Pakistan to attain a long-lasting and durable growth. And for this there is need to first endeavour to implement the macroeconomic policies, leading to the country’s economic development,” she said. “However, we will remain open to hear remarks, observations and concerns [on the IMF programme] from your end,” Ms Ruiz said.

Speaking on the occasion, LCCI President Mian Nauman Kabir said the chamber is quite sensitive about the impact of Pakistan’s ongoing 22nd IMF programme on the national economy and particularly on the private sector growth. “We will, however, witness the successful completion of this programme as well just like the 21st programme,” he added.

He termed the interaction with the IMF team better understanding of IMF policies and also know about the major success stories related to such programmes adopted by other countries.

Meanwhile, following the revival of a stalled International Monetary Fund (IMF) programme, the World Bank has now asked Pakistan to meet four prior actions during the ongoing fiscal year 2021-22 to get approval for a $350 million programme loan, The News reported on Wednesday.

The conditions include bringing the centre and provinces under one General Sales Tax (GST) regime and amending Fiscal Responsibility and Debt Limitation Act (FRDLA) through Parliament.

The harmonisation of GST among the centre and provinces has remained a major outstanding issue before high-profile National Tax Council (NTC) as all parties concerned are making last ditch efforts to evolve consensus on the definition of goods and services, bringing uniformity related to GST laws, tax rates and scope of GST but have so far failed to get the desired results.

“We are still making progress on all these issues and the NTC is also scheduled to hold another important meeting in Islamabad today” top official sources confirmed to The News.

A file picture shows International Monetary Fund’s outgoing Resident Representative, Ms. Teresa Daban Sanchez, along with the incoming Representative, Ms. Esther Perez, visited the Overseas Investors Chamber of Commerce and Industries (OICCI) on November 18, 2021

Two remaining conditions of prior actions are removal of circular debt in line with Circular Debt Management Plan (CDMP) and recovery of arrears of power sector for approval of $350 million programme loan under Resilient Institutions Strengthening Program (RISE-II).

However, the PTI-led regime has been facing difficulties for moving ahead with harmonisation of GST among federation and federating units. It is yet to be seen how the government makes progress on harmonisation of GST. The GST on goods is the domain of the centre, while on services it falls under the jurisdiction of provinces in line with 1973 Constitutional arrangements.

In the wake of IMF programme revival, Islamabad can avail Letter of Comfort (LOC) for obtaining programme loans from multilateral creditors such as World Bank and Asian Development Bank (ADB). A top official of Finance Division, when contacted, said the government had made no request to enhance the loan amount from $350 million to $500 million.“We are committed to implement the prior actions. The NTC meeting will also discuss prior actions as well” he added.

To a question, Additional Secretary External Finance Awais Manzur Sumra said: “The amounts of programme loans are decided/determined at the time of loan negotiations. “We have not reached that stage in RISE-II. We remain committed to meeting the remaining prior actions,” Sumra added.