- Today’s wrap-up meeting to finalize the MEFP and letter of intent.
- Both parties concur on backup plans for filling in data gaps.
ISLAMABAD The visiting staff mission of the International Monetary Fund (IMF) and Pakistani authorities decided on Monday to continue talks overnight to finalize the Memorandum of Economic and Financial Policies (MEFP), presumably after reaching an understanding during the final review of the $3 billion Standby Arrangement.
The schedule of revision negotiations, which ends on March 18, was previously announced by the Finance Ministry. However, confirmed sources claimed that the two sides conducted intense sector-specific talks that were impacted by Ramadan’s reduced working hours, pushing several agenda items until Tuesday (today).
The finance minister will now normally represent the ministry at the final wrap-up meeting on Tuesday, when the letter of intent (LoI) and MEFP will be finalized on behalf of the governor of the central bank and the minister. An knowledgeable source stated, “The majority of the work on the documentation is already complete.”
According to the sources who spoke with Dawn, the parties had decided on a series of backup plans to fill in data gaps in the event that there were any slippages for the period ending on March 31. In the lead-up to Pakistan’s presentation of its case to the Fund’s executive board for permission to the distribution of the final tranche of around $1.1 billion in the early half of April, the two sides would keep in regular communication. From the $3 billion SBA agreed in July of last year, $1.9 billion has already reached Pakistan.
On Monday, the parties engaged in comprehensive talks about modernizing the Anti-Money Laundering (AML) and Countering the Financing of Terror (CFT) legislation to align with global best practices, as recommended by the Financial Action Task Force (FATF). The confidentiality protections relating to bank data access to public official asset documents were also discussed in these sessions, which were attended by representatives from FBR, SBP, SECP, and other interested parties.
According to the sources, the banks would have to provide FBR with data, but there would be standard operating procedures on who could access the data, how much could be viewed, and in what format in order to prevent it from being made public. Additionally, there would be some exclusions pertaining to particular “holy offices,” but these would be few in number.
Instead of taking into account the GST, which mostly benefits the provinces, officials also alluded to raising the petroleum development levy rate on the sale of key oil products from the current rate of Rs60 to an upper limit of Rs100 per litre in the budget bill 2025.
According to the sources, Pakistan has given the IMF delegation a detailed plan on a total moratorium on circular debt in the gas and power sectors. Beginning on July 1, 2024, the base electricity tariff will be revised so that customers will have predictable monthly fuel costs and quarterly adjustments. Additionally, the outstanding circular debt, which currently stands at over Rs3 trillion—including Rs2.3 trillion in fresh stock and over Rs700 billion parked in Power Holding Company—will begin to be reduced.
Comparably, the consumer-end gas tariff would likewise see an increase in price beginning on July 1, 2024, with the regulatory procedure being finished well in advance of that date. Strict adherence to the tariff adjustment schedule would be maintained for both the gas and power sectors. This would also be included in the next “longer and larger” agreement with the IMF, which would be finalized in conjunction with the World Bank and IMF’s spring meetings scheduled for April 15-20.
According to the sources, the government has already committed to enhancing the real estate industry’s tax system and has shared the FBR’s digitalization program with the fund mission.
The next federal budget will contain relevant laws and supporting legislation for this reason, as well as for the efficient regulation of the retail and wholesale sectors, in harmony with the provinces. Retailers who want to register voluntarily will also be subject to taxes.
All real estate organizations and housing authorities would be registered with the appropriate revenue agencies, and the tax rates for non-filers in real estate transactions would be significantly and unreasonably raised. Their banking instruments and the retail sector’s points of sale (POS) network will be used to track their transactions.
During a related meeting, Sardar Awais Ahmad Khan Leghari, who was reassigned to the Power Division ministerial portfolio, stated in a statement that the country’s economy is negatively impacted by the fact that “circular debt has mounted to Rs3 trillion with an annual addition of approximately 700bn to 800bn.” According to the statement, he is steadfastly dedicated to take all reasonable steps to reduce circular debt and other inefficiencies that are ailing the power industry and impeding its development.
