Islamabad:
Pakistan informed the International Monetary Fund (IMF) on Friday that it could not reach the tax target of 3.1 Billions of rupees of this quarter, but hoped to recover the deficit by inflation, economic growth and higher imports of solar panels.
In a briefing at the IMF delegation, the tax authorities declared that the objective of July-September would be missed by a significant margin. During a separate meeting, the electricity division informed the lender about developments in the electricity sector, in particular the RS1,25 rules of circular debt through bank loans.
The talks take place for the publication of a loan section of $ 1 billion under prolonged funding (EFF) and an additional $ 220 million under the ease of resilience and sustainability (RSF).
During the meeting with the Federal Board of Return (FBR), the IMF has inquired about income projections and the impacts of floods on this exercise. The government has set the annual objective of RS14.13 Billions, which can also be missed as last year when the FBR failed more than RS1.2 Billions.
Against the objective of July-September of 3.08 Billions of rupees, the FBR said that the IMF collection could remain below Rs 2.95 Billions, sources said. The government hoped to recover the deficit from November once economic activities are accelerating.
Similar hopes were made the last exercise, but remained dissatisfied.
Although a separate session on macroeconomic projections is due next week, the tax authorities see the economy by more than 3% this exercise despite the floods. They also projected inflation due to the disturbances of the supply linked to floods, sources said. These two factors can compensate for certain loss of income.
The customs service informed the IMF on the implications of reducing regulatory tasks. He said that import tax collection increased by 16% in the first two months. Officials hoped that emergency measures would not be necessary to compensate for the reduction in rights.
Imports increased 9% in dollars and two figures in terms of rupees, compensating for rights reductions.
The IMF has been informed that RS190 billion projected through law application measures will be paid with annual yields. The government hopes that the 10% tax on sales in the old FATA will also increase the collection.
The FBR also had to go back from an immature proposal to add an estimated merchant value of goods in income tax declarations.
After the misstep, Prime Minister Shehbaz Sharif trained a committee chaired by the minister of Law, senator Azam Nazeer Tarar, to examine the new column of IRIS income declarations, forcing declarants to declare fair value estimated assets, to assess the implications and to recommend corrective measures.
The committee met on September 26. After the deliberations, he recommended to withdraw the column in the interest of the simplification of the deposit. The recommendation was submitted and approved by the Prime Minister.
The FBR said that the column was only intended for data collection to support the economic survey, not on income or tax liability. But the complaint did not hold ground.
The tax authorities hoped that the increase in imports of solar panels would compensate for deficits. The IMF had budgeted by 18 billion revenue of the 10% tax revenue on solar imports. In the first two months, around 6 billion rupees have already been collected, sources said.
However, the FBR feared a drop in tax collection thanks to electricity bills due to the drop in demand from the national network. Grille demand drops due to the rise in prices, slowdown and policies pushed by the IMF, the World Bank and the Ministry of Energy.
Meanwhile, the Minister of Power Sardar Awais Ahmed Khan Leghari said that the current structure of the solar net measure remains an essential challenge to sustainable reforms. He has repeatedly declared the net measure in its current form poses a financial imbalance affecting the wider consumer base.
The electricity division indicated that around 350,000 consumers of net solar control benefit from favorable decline tariffs, the cost indirectly carried by 35 million other consumers.
Unaffordable energy prices have forced consumers to move on to solar energy, and the government is struggling to attract them while distribution companies are faced with the decline in residential demand.
The division of powers also informed the IMF of progress in the regulation of the circular debt by loan, the reduction of line losses and the improvement of the resumption of the bill. But concerns remain concerning sustainability.
He said the government had already saved RS175 billion due to the drop in interest rates and another RS242 billion by reducing theft and technical losses.
Prime Minister’s adviser on privatization Muhammad Ali said that HBL president Sultan Allana provided total support to the name of the banks to increase the debt by 1.25 Billion of rupees for compensation for power producers.
“This trip started with our meeting with the president of HBL, who provided us with total support in the national interest,” said Ali. He added that although the banks initially wanted a smaller number, they ultimately agreed with the justification, supported by the Minister of Finance and the State Bank management.
The IMF was informed that the unionized loan RS1.225 Billion was organized with the participation of 18 banks. Refunds will be made from a dedicated surcharge already integrated into the invoices, guaranteeing the predictability of lenders and minimizing the budget charge.
The installation addresses the circular debt of 1.225 Billion of rupees thanks to the structured Islamic financing of Bai Muajjal, financing of Ijara and Sukuk obligations floating on the stock market.
Funding was obtained at a rate of 0.9% lower than prices from Karachi Interbank offered (Kibor) in force for a maximum of six years. Refunds will be made by invoicing RS3.23 on each unit consumed by paid customers.
Under the arrangement, the debt will be authorized in less than six years, with 350 billion savings of rupes passed on to consumers. The agreement also allows 377 billion rupees of late payment supplements, reduces the cost of the circular debt by 1.5% and the funding cost by 1.5% per year.
“The Prime Minister’s vision was that the consumer should be the winner of this exercise,” said a special assistant from the Prime Minister.
