ISLAMABAD: A staff mission of the International Monetary Fund (IMF) would be visiting Pakistan on Monday (April 29) for negotiations on a three-year bailout package for economic reforms including the introduction of a single Value Added Tax (VAT) regime.
The announcement came following a meeting between Prime Minister Imran Khan and IMF Managing Director Ms Christine Lagarde in Beijing on Friday on the sidelines of the Belt and Road Forum.
“The IMF team will visit Pakistan starting April 29 to continue technical discussions for an IMF supported programme,” said Finance Minister’s spokesman Dr Khaqan Najeeb hours after the Beijing meeting. He said the Pakistan side for negotiations with the IMF will be led by Dr Abdul Hafeez Shaikh, Adviser to PM on Finance.
Earlier in the day, IMF’s Country Representative in Islamabad Teresa Daban Sánchez had told media that the two sides were “still working out the details jointly with the authorities because of logistics and security considerations”.
Dr Khaqan said extensive preparation for data and macroeconomic framework finalisation and structural reforms had been ongoing among all key stakeholders including State Bank of Pakistan, Power and Gas Division, Privatisation Commission, Federal Board of Revenue and Benazir Income Support Programme among others for sharing with the IMF.
The successful conclusion of the talks would translate into a Federal Budget 2019-20 envisaging at least additional resource mobilisation of close to Rs500bn or around 1.2pc of GDP under a three-year fiscal adjustment and stabilisation programme.
The talks are taking place at a time the IMF had early this month forecast Pakistan’s fiscal deficit continuously elevated at close to 8pc and deteriorating debt-to-GDP ratio to reach 86pc over the next five years.
Pakistan authorities on the other hand have finalised the government’s strategy to deliver on Medium-Term Economic Framework 2019-23 (MTEF) targets to be finalised by the IMF.
The two sides have been engaged since August last year but talks were suspended in November when they could not reach agreement on economic adjustment plan as the IMF wanted upfront steep policy actions to reduce fiscal deficit through higher taxes and increase in gas and electricity prices and allow a market based exchange rate.
The government was, however, reluctant to take severe economic decisions of political nature at the earliest even though it increased electricity and gas prices and devalued currency significantly and wanted to stagger the burden on the people in the coming budget.
According to data finalised under the MTEF, the authorities have made up mind for an additional revenue effort matching about 2.6pc of GDP over a period of three years. The federal taxes are committed to increase by a total of 2.3pc (about Rs1.08tr) during three-year reform process under the IMF programme, starting with 1.1pc of GDP in upcoming fiscal year 2020.