- The IMF mission could conclude its negotiations with the Pakistani authorities today.
- The Fund may prefer to issue a press release following the negotiations.
- The lender is looking to make progress on six key revenue generation areas.
ISLAMABAD: Amid concerns raised over the inability of the federated units, particularly Punjab, to generate the desired revenue surplus, the International Monetary Fund (IMF) mission has asked provinces for specific deadlines for their contributions to expenditure on higher education and the Benazir Income Support Program (BISP) to reduce expenditure.
The National Fiscal Compact (NFP) was signed by the Center and four provinces just before getting approval from the IMF Executive Board under the $7 billion Extended Financing Facility (EFF), while five Governments have agreed on a budgetary framework to increase revenues, share expenses and improve governance.
The visiting IMF mission continued its deliberations with Pakistani authorities here on Thursday and they were now moving towards the conclusion with the hope that both sides would conclude the talks on Friday (today).
It is likely that the IMF will prefer to issue a press release at the end of five days of negotiations, starting on November 11 and ending on November 15.
The IMF reviewed progress on Public Investment Management (PIMA) and Climate-PIMA on Wednesday evening and Thursday morning as Islamabad has already requested an additional $1 billion in financing from the IMF under climate finance to increase loans of 7 to 8 billion dollars.
Under C-PIMA, the Government will produce a report detailing the results of our review of all Public Sector Development Program (PSDP) investment projects by December 2024.
The findings of this review will help streamline the PSDP pipeline by developing a prioritization mechanism for existing projects, identifying those that can be capped or canceled.
In addition, to improve its project selection framework, the government would publish on the website the project selection criteria, including a rating sheet, detailing the weight assigned to each criterion and the methodology for calculating the rating, as well as than an annual limit on the total size. of new projects entering the PSDP portfolio by the end of January 2025 Structural benchmark (SB).
The IMF has expressed serious concerns over the failure of provinces to generate an agreed revenue surplus in the first quarter of the current fiscal year. Faced with the objective of Rs342 billion, the revenue surplus objective met with failure with slippages of Rs160 billion during the first three months of the current financial year.
The IMF sought to make progress on six key areas of revenue generation, as all provinces agreed to amend agricultural income tax (AIT) regimes to be fully aligned, through necessary legislative changes , on federal personal income (small farmers) and on corporate income (commercial agriculture). tax regimes by the end of October 2024 and begin taxation of agricultural income under this new regime from January 1, 2025, with collection for the second half of agricultural income for the financial year 2024-25 in July 2025.
Second, provinces will transition the GST on services from a positive list approach to a negative list approach to combat tax evasion, which will come into effect from the start of the 2025-2026 fiscal year.
Third, they aim to collectively increase revenues from corporate tax in the agricultural sector and GST on services, combined with provincial tax efforts to expand other areas of revenue collection. Fourth, they will develop, implement and collect revenue under a common approach to property taxation. Fifth, all provinces will implement the administrative reforms necessary to narrow the tax compliance gap, including with respect to the GST.
Sixth, the provinces would agree that the mandate of the National Tax Council be expanded to include the design of relevant fiscal measures, including property taxes, and the legal and administrative changes necessary for their implementation.
Regarding the spending measures, the provinces agreed on key points, as the provinces would provide additional contributions for higher education to the federal government. Initiatives supported by the Higher Education Commission (HEC) federal and provincial governments would gradually replenish spending on health and education programs as a share of expenditure. GDP.
The Federal Government, in consultation with the provincial governments, would review the social protection programs deployed/planned by the provincial governments and the BISP respectively, to identify overlapping programs and budgetary allocations, and take prudent fiscal measures in consequently, in order to reinforce and improve generosity. and social protection coverage.
The provinces will cover all expenditures of the PSDP, which benefit only one province, as well as any expenditure of the federal government in the areas allocated to the provinces in the 18th Amendment, in accordance with the decision of the National Economic Council (NEC), with certain exceptions to determined by the NEC. based on well-defined criteria.
Provinces should stop announcing support prices (for raw materials) and also stop procurement operations. The federal government should reduce its footprint in accordance with the 18th Amendment. If necessary, issues requiring consensus and federal and provincial coordination may be referred to the Council of Common Interests (CCI) or CEN forum.
The IMF calls on all provinces to implement the National Fiscal Compact in letter and spirit. In return, the provinces demanded from the IMF that there be a policy dealing with the revenue surplus instead of simply publishing figures showing an improvement in financial figures at the federal level.
Originally published in News