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IMF evaluating revenue steps

imfIMF evaluating revenue steps

ISLAMABAD: To assess the credibility of tax collection projections, the visiting IMF team has sent a draft of revenue collection measures announced in the budget 2013-14 to Washington, it is learnt.

Pakistan’s economic team, led by Finance Minister Ishaq Dar, told the IMF team that they have taken more than Rs202 billion revenue measures, including Rs35bn administrative measures to achieve the next year revenue collection target of Rs2475bn for the year 2013-14.

This claim of the finance team would be evaluated in Washington by experts.

The evaluation may take a few days, and the IMF delegation, led by Jeffery Frank, would remain in Pakistan till July 4 for further talks with the finance ministry officials over the proposed programme.

The extension in the stay of the IMF team is interpreted as willingness to continue talks over the proposed programme. The technical level meetings of the Fund with Pakistani officials ended on June 26 followed by a policy level meeting on June 27.

The source said that the IMF has only one standard condition: to reduce the fiscal deficit to 4.5 per cent in the next three years. This target has been left for Islamabad to decide if it wants to do it through reduction in expenditures or withdraw subsidies or tax exemptions.

However, the Fund has asked for a clear policy programme from Islamabad envisaging clear targets in terms of revenue collection, cuts in expenditures etc in the next three years. The Fund would have to present Islamabad programme to its major donors countries and agencies before approving new loan for Pakistan, the source added.

The budget was approved in the National Assembly with minor changes on Thursday.

This would pave way for the next IMF programme, an official in the finance ministry told Dawn.

In the budget, Mr Dar announced that revenue collection during the concluding 2012-13 year would touch Rs2007 billion. It seems it would actually be much below this revised target despite implementation of the tax measures, including raise in the GST rate from June 13, 2013.

The FBR now projects revenue collection at Rs1,900 billion in case FBR collects Rs220bn in June. The revenue collection until June 26 stood at Rs183bn, making it difficult for the tax machinery to collect even Rs200bn by the end of June 30.

With this low collection, the FBR said that revenue collection may reach Rs1880bn, lower by Rs8bn from the last year’s collection of Rs1888bn, showing a dismal revenue performance of the board.

One major issue of low revenue collection, the source said was the governance issue within the tax machinery.

A source in the FBR said that the IMF has also sought next two years’ policy proposals from the government, especially regarding taxation measures. However, the source said it might not be possible for the government to provide it in advance.

The source said that the next year revenue collection target would also depend on evaluation report of the IMF.

The revenue target for next year will be finalised after having feedback from the IMF, the source added.

“We have either to go for further taxation or reduce the expenditures,” the source said, adding the IMF was suggesting more revenue measures because of greater potential in revenue mobilisation.

The IMF is believed to have shown its discomfort over the government’s old tactics of taking timely measures to raise few billions.

The Fund has asked for long-term policy measures, like enhancement in the tax base, withdrawal of tax exemptions and reductions in concessionary SROs. Such measures have long term revenue implications.


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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