Islamabad:
The International Monetary Fund can lower the target of tax recovery to less than RS12.5 Billions due to the overall slowdown in economic activities and a huge deficit undergone so far in a decision that will always require the objectives of remaining four months and partially recover part of the deficit.
Any reduction in the objective compared to the initial objective of more than RS12.9 Billions will depend on the capacity of the Ministry of Finance to reduce spending to protect the overall objective of the IMF program to generate 1.2 billion of primary budget intelligence rupees during this exercise, according to government sources dealing with the IMF team.
The IMF also asked the Ministry of Energy to share its projections of the circular debt for the next financial year 2025-2026. The division of power assured the IMF that during this circular debt of the exercise will remain below the agreed threshold of RS2,429 Billion.
The IMF and the Pakistani authorities met Wednesday for the third consecutive day to discuss the performance of the energy sector, progress in the publications of various social and economic surveys by Pakistan Bureau of Statistics. The discussions also took place on the number of budgets and external financing requirements.
Government sources have said that both parties have discussed the possibility of reducing the tax objective between 12.3 billions of rupees to Rs12.5 Billion. Tax authorities have suggested reducing the objective of 579 billion rupees against the annual objective of RS12,913 Billion, they added.
The sources have indicated that the IMF indicated its lowering of 435 billion rupees unless Rs12.5 Billions, but no official decision has been made.
The tax authorities were of the opinion that the trend of the last four years suggested being able to achieve the remaining objectives but needed an adjustment compared to the total objective.
The FBR informed the IMF that it was comfortable to achieve the objective of the market collection of March. But there may be a shortfall against April and target May, which should be recovered in June.
The FBR has presented a plan aimed at reducing the tax rates of tobacco, drinks and construction sectors in order to obtain another RS 90 billion through economic activities and better sales. Nearly 300 billion rupees are said to be recovered from judicial affairs.
In pursuing a very fiscal objective of more than RS12.9 Billions, the government had slapped RS1.3 Billions of additional taxes, mainly loading existing persons and paid sectors. However, it has already supported 606 billion rupees of rupees during the July-February period. The salaried class has become the victim and yet the target could not be reached.
Due to independent growth lower than it, the FBR has undergone a loss of around 450 billion rupees by February. No other deficit on this account is expected before June, according to FBR officials.
The IMF has set up the condition to generate a primary budgetary excess equal to 1% of the size of the economy or little more than 1.2 Billion of rupees. Any reduction without adjusting expenses can compromise this objective.
The sources indicated that the Ministry of Finance had little budgetary space to reduce spending, except by making another major adjustment in the public sector development program. It is possible that the Ministry of Finance does not disclose the versions of the fourth quarter budget for projects funded abroad.
The government had initially proposed 1.4 Billion of RSDP, which has already been reduced to Rs1,1 Billion. But expenses during the first half were low enough, leaving a large place for new cuts in the development budget.
The Ministry of Finance also expects an economy of around 50 billion rupees against the allocated subsidy of this year to the electricity sector.
One of the options to recover some of the gaps is to recover prior income tax under article 147 of the income tax order. Authorities estimate that around 13 billion rupees can be recovered by making additional efforts.
During the first seven months of this exercise, the FBR received 929 billion rupees in advance of income tax under article 147, which was 27% higher than the corresponding period last year.
The FBR informed the IMF it had recovered 90 billion rupees thanks to application measures during the first eight months of this exercise. But this came mainly from banks due to income tax and increased basic tax rate to 44%.
On Tuesday, the Minister of Finance Muhammad Aurangzeb told the Express PK Press Club that the government would exhaust other avenues to make the deficit of income instead of taking additional income measures.
The Pakistan Bureau of Statistics also gave a briefing to the IMF on the publication status of various social and economic surveys. These surveys are essential for knowing the real economic and social health of society, because the government does not have the last number of poverty, unemployment and the census of agriculture.
The PBS informed the IMF that currently, the field operations of the very first integrated economic survey in the Digital Province (HIES), 2024-25 are underway.
The Hies provides a clear image of the rate of literacy, schoolchildren, inscriptions, children’s health, in particular the infant mortality rate, women’s health and household income indicators, economies, liabilities and consumption expenditure and consumption models at national and provincial level with an urban and rural rupture.
This survey also provides data required for the estimation of consumption -based poverty. Out of 62 sustainable development targets in total, 31 indicators are covered in HIES surveys, the IMF has been informed. The lender was informed that HIEC results will be published in December of this year.
Pakistan has also launched the investigation into the 2024-25 working population and the field work is currently underway. The Government has told the IMF that quarterly labor reports will not be published; Instead, an annual report will be published within six months of the completion of field work.
