Finance Minister Ishaq Dar has reached Dubai to join his team for a three-day policy-level discussions with the International Monetary Fund (IMF) under seventh quarterly review of Extended Fund Facility (EFF) from today (Thursday). It is unclear whether the IMF would take the unprecedented step of imposing prior conditions before the release of the eight tranche as it did for the release of the seventh tranche.
"It is usual for the Fund to have prior conditions only before the approval of a programme and not before a tranche release," sources privy to the workings of the Fund told Business Recorder on condition of anonymity. Three prior actions for release of seventh tranche include;(i) raise GST rate on petroleum products from 17 to 27 percent, introduce additional fiscal measures, including a 0.1 percent of GDP reduction in electricity subsidies, with total yield of 0.35 percent of GDP to assure compliance with the year-end fiscal targets; (ii) revise the draft SBP law in the NA committee incorporating the recommendations of the IMF safeguards assessment mission and comments provided by Fund staff and submit the revised draft to the full assembly; (iii) take measures to recover part of the GIDC proceeds focusing on areas where large collecting agents have already collected the GIDC in their price, with a yield of 0.1 percent of GDP.
Sources said the six-day technical-level discussions concluded on Wednesday (yesterday) and the next round of policy-level discussions would commence from today and continue till Saturday. Their successful conclusion would enable Pakistan to qualify for the eighth tranche of EFF by end June 2015. An official of Finance Ministry said that Finance Minister will try to persuade the IMF team to hold the next review in Pakistan instead of Dubai as security situation has significantly improved since the National Action Plan was launched.
According to a statement issued by Finance Ministry, Dar has arrived in Dubai from Baku after attending the 48th annual meeting of Asian Development Bank (ADB) Board of Governors, its related events and discussions on the sidelines of the meeting. The Minister will be joined by Governor State Bank of Pakistan as well as other senior officials for policy-level talks.
An official on condition of anonymity said that policy-level discussions would largely focus on budgetary targets for next fiscal year, especially fiscal deficit, revenue collection and power sector subsidies. The reason for the delay in the finalisation of Budget Strategy Papers- 2015-18 till mid May is to bring the budgetary proposals in line with the IMF suggestions/concerns. The final draft would then be presented to the cabinet for approval, sources added.
Finance Minister would take the IMF into confidence with respect to withdrawal of concessionary SROs in the next fiscal year's budget as well as measures to broaden the tax base - a long-standing IMF/donor demand. Finance Ministry committed to the IMF in the sixth review that necessary legislation would be undertaken to permanently prohibit the issuance of SROs to grant tax concessions or exemptions but with a proviso that the Finance Minister alone would be able to issue exemptions. Thus the power to issue SROs would be withdrawn from Federal Board of Revenue (FBR) and delegated to the Economic Co-ordination Committee (ECC) of the Cabinet through Finance Bill in the next fiscal year.
Finance Ministry has also agreed to reorganise the Debt Policy Co-ordination Office as a middle office responsible for updating Medium-Term Debt Management Strategy (MTDS) and monitoring its implementation, co-ordinating the credit risk management functions.
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