Pakistan eyes 2nd tranche as policy-level talks with IMF start

The Fund briefed on progress on achieving Rs9.4 trillion tax collection targets

ISLAMABAD  -  Crucial policy-level talks between Pakistan and the International Monetary Fund (IMF) started on Monday as Islamabad is looking for the second tranche worth of $710 million under the $3 billion standby loan programme.

The technical talks between the two sides had started from November 2 in Islamabad that involved an exchange of the latest data, first quarter (July to September) data and queries and clarifications on all macroeconomic areas. The policy level talks, which were started on Monday, are expected to complete within the current week. Officials from the Ministry of Finance, Federal Board of Revenue (FBR), State Bank of Pakistan and from other ministries would brief the visiting delegation on the economic situation of the country. 

The IMF review mission had commended the government on its progress toward economic recovery, the finance ministry had said earlier this month. The Pakistani delegation is led by Interim Finance Minister Shamshad Akhtar and comprises State Bank of Pakistan Governor Jameel Ahmad, Federal Board of Revenue Chairman Malik Amjed Zubair Tiwan, and officials from the finance and energy ministries. Nathan Porter was heading the IMF team during the negotiation. Finance Ministry sources said that the IMF delegation presented their recommendations and demands during the session. In the technical- level talks, economic data was shared with the team of the international lender.

The FBR has informed the Fund that it had surpassed the tax collection target during the first quarter of the ongoing financial year. It was also briefed that there would be no need to bring a mini budget at this stage as the FBR would achieve the annual tax collection target of Rs9.4 trillion during the current fiscal year without additional revenue generation measures. The FBR has shared its plan with the IMF regarding tax collection in the ongoing financial year. It was agreed to bring the retail sector into the tax net and improve the targeting of real estate- based revenue collection. 

A successful review – the first of the two under the $3 billion stand-by arrangement will result in the release of $710 million in second tranche in December (next month) – to be a followed by a similar exercise in February and March. The IMF had approved a nine-month stand-by arrangement (SBA) for Pakistan worth $3 billion in July this year. Pakistan had received one tranche $1.2 billion in July 2023. 

An official informed that Pakistan would receive the second tranche as it has already met the conditions. It has achieved key targets; including achieving the disbursement of Rs87.5 billion in cash transfers to beneficiaries under the Benazir Income Support Programme (BISP). 

Meanwhile, the government has also achieved the target of primary budget surplus and petroleum levy in July to September period. It was informed that the government had already increased the gas and electricity prices to overcome the circular debt in the energy sector. Pakistani officials assured the IMF delegation that targets are being implemented under the loan programme and that all the conditions of the IMF have been implemented so far. The finance ministry had taken note of the progress on quantitative performance criteria, continuous performance criteria, indicative target, and structural benchmark conditions agreed with the IMF for the end of September 2023 under the $3 billion SBA programme. Meanwhile, State Bank of Pakistan (SBP) officials said that they are on track to meet the floor on net international reserves (NIR) which they said would stand at negative $14.5 billion till the end of September 2023.

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