ISLAMABAD: As the government has not yet been able to make legislation for imposition of Reformed General Sales Tax, an International Monetary Fund (IMF) team, scheduled to visit Pakistan in the last week of January, will talk to political parties regarding RGST.
According to sources, the government had informed IMF regarding the political parties' tough stance on RGST and asked IMF to convince political leadership to support the RGST. It is to be mentioned here that the IMF had linked the last two tranches of the Stand-by Agreement with ending power subsides, imposition of RGST and fiscal deficit target of 3 percent of the GDP in first half of current fiscal year.
However, the government has failed to garner required support for passing the tax broadening law from the parliament. Now, an IMF mission headed by Adnan Mazari is schedule to visit Islamabad in the last week of January to restart negotiations on economic outlook and reformed sales tax.
The $11.3 billion IMF Stand-By programme has derailed since May last year, causing severe problems of liquidity and GOP is heavy relaying on borrowings from State Bank and commercial banks. Despite Rs 350 billion of commodity financing, GOP has borrowed Rs 200 billion form commercial banks and Rs 119 billion from State Bank to fulfil current expenditures.
An informed source said that the GOP has to bring back IMF Stand-By programme on track. "To give up IMF programme means to eat up SBP foreign exchange reserves," he added. According to official sources, if the government could not secure some external proceeds in next half of fiscal year, SBP reserves may drop to alarming level of $10 billion by the end of fiscal year 2011.
The federal government has restricted release of development programme to Rs 70 billion in first half of the fiscal year 2011. Cut on development programme is considered but that amount of revised PSDP has not yet been finalised by the prime minister. A meeting between Prime Minister, Deputy Chairman Planning Commission and Secretary Finance to finalise the revised amount of development budget has not yet taken place due to the prime minister's political engagements. The planning commission has proposed Rs 170 billion PSDP and Finance Ministry's commitment to Planning Commission is about Rs 140 billion for revised PSDP.
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