ISLAMABAD: In order to broaden the tax base and boost collections, Pakistan’s revenue system is set to undergo digitalization. The International Monetary Fund (IMF) has requested a comprehensive, output-based update on these plans.
Despite considerable opposition from powerful, rent-seeking corporations, the government has committed to stopping the gas supply to captive power plants (CPPs) by January 2025 and rerouting them to the national grid. Any changes to this program standard have been categorically rejected by the IMF.
Finance Minister Muhammad Aurangzeb met with the visiting IMF team on Tuesday for an initial discussion. Nathan Porter, the head of Pakistan’s delegation, chaired the meeting. In addition, State Bank Governor Jameel Ahmad, Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langrial, and Minister of State for Revenue Ali Pervez Malik were in attendance.
The FBR, the electricity and petroleum divisions, and the regulatory bodies for the energy sector are among the stakeholders with whom the mission is also holding separate technical sessions. Participants told Dawn that aside from posing exploratory questions, the mission seemed to have not yet made its opinion known in any of these interactions.
The dialogue’s potential to result in policy-level conversations, which were a crucial component of the quarterly reviews of IMF programs, is yet unclear.
However, in order to disburse around $1 billion in installments each cycle, the present $7 billion Extended Fund Facility (EFF) is established so that the IMF and Pakistani authorities hold biannual review meetings.
For Pakistan to be eligible for payment of a second installment of more than $1 billion by March 15, 2025, the first formal review must be conducted based on the end-of-December performance.
According to officials, the IMF mission has demanded thorough justifications for the digitization of FBR’s revenue collection procedures, the use of artificial intelligence to find and track down tax evaders, their taxable revenues, and their enterprises, as well as the participation of specialized expert firms. Additionally, they have requested a thorough overhaul to the track-and-trace system.
During the first meetings, the FBR blamed the falling inflation for recent income shortages, especially in the first month of the second quarter.
In terms of current revenues and circular debt, the power sector’s performance seems to be within agreed-upon bounds.
Compared to previous estimates of Rs240–250 billion, circular debt increased by almost Rs70 billion. Only last week did the Finance Minister-led Economic Coordination Committee (ECC) endorse a circular debt management plan.
Sources said the government has been going back and forth over the disconnection of gas supply to inefficient captive power plants, owing largely to the textile sector, to utilize extra capacity in the national power grid.
However, gas corporations have suddenly come to the industrialists’ aid. On the grounds that electricity connections were either unavailable or insufficient in some locations, several stakeholders are now advocating for the provision of imported LNG to CPPs at a weighted average cost of local and imported molecules.
On Wednesday (today), the power and petroleum divisions will meet jointly with the IMF delegation to discuss a number of interconnected topics, such as circular debt, anticipated tariff modifications, loss reduction programs, and recoveries.
