IMF - International Monetary Fund Program Updates

[ghazi52]

Most Asian central banks have room to cut interest rates, IMF says​

WASHINGTON: Most Asian central banks have room to cut interest rates, as the start of the US monetary easing cycle...

 

[ghazi52]

$7 billion IMF bailout falters as economy strains​

Centre, provinces struggle to meet strict conditions

Shahbaz Rana
October 31, 2024

ISLAMABAD: The fundamental assumptions used to finalise the $7 billion deal with the International Monetary Fund (IMF) have gone haywire within a month of its approval, leaving the authorities concerned with an option either to renegotiate the package or keep suffocating the economy through more taxes.

Official statistics show that out of four key underlying assumptions for achieving the nearly Rs13 trillion tax target -– the economic growth rate, inflation, large-scale manufacturing and imports — three assumptions have already proven wrong by the end of the first quarter of the current fiscal year.

The federal government has also overly committed on behalf of the four provincial governments that, too, are struggling to meet their conditions soon after the deal became effective.

The official statistics for the first quarter (July-September) revealed that — from the Federal Board of Revenue’s tax collection target to provincial cash surpluses — everything has gone off the mark. Deputy Prime Minister Ishaq Dar has also publicly spoken against the market-determined exchange rate regime, which is another core objective of the $7 billion Extended Fund Facility.

 

[ghazi52]

The IMF is again pressuring Pakistan to let the rupee further devalue; although as per Dar’s views the rupee is already undervalued by at least 16%.

The IMF deal is facing serious implementation challenges even sooner than many had predicted, underscoring how badly it had been knitted by the negotiators from both sides. The Express Tribune had reported that Pakistan finalised a wrong deal with the IMF, which might soon derail.

The sources said that except for the GDP growth, which remains within the assumption range of 3%, the other three autonomous growth indicators – inflation, imports and large scale manufacturing – went off the mark in the first quarter.

As against the projected inflation rate of 12.9%, the average inflation in the first quarter remained at 9.2%.

The development comes amid the Ministry of Finance’s new inflation forecast for October. In its monthly outlook report, the finance ministry stated on Wednesday that “it is expected that inflation will remain within the range of 6-7% in October and further down to 5.5 – 6.5% by November”.

Nearly 17% import growth had been used for reaching out to Rs13 trillion tax target but the imports grew only 8% in the first quarter due to dampened demand. The large-scale manufacturing growth also remained at 1.3% in the first quarter as against the assumption of 3.5%.

The FBR has already sustained a Rs90 billion tax shortfall in the first quarter and an internal assessment showed that the tax shortfall may widen in the range of Rs350 billion to Rs400 billion by December this year.

After seeing the results of the first quarter and the early signs of the second quarter either the government will have to reopen the assumptions used for the fiscal framework or keep chasing the unrealistic targets.

 

[ghazi52]

The contingency measures that the IMF has finalized in case of missing the tax target would further suffocate the economic growth and lower the home take incomes of the majority of the taxpayers.
The situation warrants a holistic review of the IMF deal, as even a mini-budget cannot help to achieve the unrealistic target due to multiple factors. The government’s efforts to boost revenues by blocking the genuine tax refunds and taking undue advances have also not helped to achieve the monthly tax targets.

There is one view in the official circles that any savings from the reduction in the interest rates should be offset against the FBR’s tax targets. The government has set aside Rs9.8 trillion for the debt servicing on the basis of an average interest rate of 17.5% for this fiscal year. However, due to faster than anticipated slowdown in inflation, the interest rates may see a major cut, as indicated by the Deputy Prime Minister Ishaq Dar on Tuesday.

For this fiscal year, the IMF has given Rs12.92 trillion tax targets and the government imposed at least Rs1.2 trillion worth additional taxes in addition to promising additional collection from traders and businesses through enforcement measures.

The impact of the nominal increase in prices (inflation plus GDP growth) is estimated at Rs1.57 trillion for this fiscal year. Out of this, the first quarter’s estimated inflation impact was Rs281 billion but the realised impact was hardly Rs130 billion due to single-digit inflation.

The GST collection at the import stage had been projected at Rs629 billion but it remained at Rs482 billion due to 8% increase in imports in the first quarter. This created a shortfall of Rs147 billion, which was largely filled on the income tax side due to increased tax rates and taking some advances. The higher return filing also gave Rs55 billion windfall to the FBR in the first quarter.

Due to single-digit growth in imports, the custom duties collection remained at Rs276 billion as against the estimated Rs266 billion.

 

[ghazi52]

The situation is going to further aggravate for the second quarter (October-December) period. Due to wrong assumptions at the time of signing the deal, the FBR fears that it may take another additional hit of at least Rs254 billion.

The impact of the autonomous growth is estimated at Rs484 billion for the second quarter but the realized value may not be more than Rs230 billion.

 

[ghazi52]

The publicly available indicators suggest that the FBR may again face an additional shortfall of Rs125 billion on account of low collection of sales tax and excise duties at the domestic stage. The impact of import compression is also estimated at Rs320 billion on accounts of all import taxes.

Some of these adverse impacts would be offset by about Rs225 billion excess collection of income tax on the back of higher tax rates.

The provincial governments also could not show the required cash surpluses of Rs342 billion and fell short of the target by Rs182 billion in the first quarter. This would further dent the primary budget surplus goal.

The provincial governments have also reluctantly signed the National Fiscal Pact and some major conditions are going to be missed in the coming weeks.

$7 billion IMF bailout falters as economy strains | The Express Tribune

Centre, provinces struggle to meet strict conditions

tribune.com.pk

 

[ACE OF HEARTS]

U.K. joins Europe in targeting the super-rich with fresh crackdown on foreign wealth, capital gains, and private jets

U.K. joins Europe in targeting the super-rich with fresh crackdown on foreign wealth, capital gains, and private jets

Rachel Reeves plans to jack up taxes on capital gains and foreign wealth of affluent individuals—although there might be other casualties, too.

fortune.com

Additional taxes can be levied taking example of the counties above. Taxing the super rich elite of the county won't hurt the common man, with Paradise papers + Panama Leaks + Pandora papers + other leaks already available with plenty of information on which people to catch to plug the budget shortfall.

Similarly, IPP owners hiding behind foreign governments, and trying to exert pressure on the government, should be requested to pay higher taxes.

Any devaluation of PKR would lead to chaos on the streets, with obvious inflation and anarchy, specially when the economy Is hardly recovering on paper.

Agricultural tax should be implemented as soon as possible from where estimated Rs 500 billion can be earned on annual basis, and which can save Pakistan from International economic pressure.

IMF proposes 45% tax on agriculture income | The Express Tribune

tribune.com.pk

 

[ghazi52]

IMF demands additional revenue measures after Pakistan misses tax targets​

The IMF also declined Pakistan's request to revise down the FBR's tax collection targets

Irshad Ansari
November 02, 2024

Anadolu Agency

The International Monetary Fund (IMF) has asked Pakistan to implement extra revenue measures following the Federal Board of Revenue's (FBR) revenue shortfall in the first four months of the fiscal year.

The IMF also declined Pakistan's request to revise down the FBR's tax collection targets.

According to FBR sources cited by Express News, the IMF urged Pakistan to make up for the tax shortfall with additional revenue-raising steps.

During virtual discussions with the IMF, the FBR had sought a downward revision of its tax targets, but the request was denied, sources said.

The FBR’s tax shortfall may impact the disbursement of the second loan tranche, and further measures could be needed if the shortfall grows in the coming months, sources added.

 

[Circadian Rhythm]

IMF demands additional revenue measures after Pakistan misses tax targets​

The IMF also declined Pakistan's request to revise down the FBR's tax collection targets

Irshad Ansari
November 02, 2024

Anadolu Agency

The International Monetary Fund (IMF) has asked Pakistan to implement extra revenue measures following the Federal Board of Revenue's (FBR) revenue shortfall in the first four months of the fiscal year.

The IMF also declined Pakistan's request to revise down the FBR's tax collection targets.

According to FBR sources cited by Express News, the IMF urged Pakistan to make up for the tax shortfall with additional revenue-raising steps.

During virtual discussions with the IMF, the FBR had sought a downward revision of its tax targets, but the request was denied, sources said.

The FBR’s tax shortfall may impact the disbursement of the second loan tranche, and further measures could be needed if the shortfall grows in the coming months, sources added.

I saw Dr Kaiser Bengali's talk shows

He said that due to Excessive Tax demands , Businesses are simply closing down

IMF wants either increase taxes or Reduce Expenditure

Now other option to have a balanced budget is to reduce Expenditure

 

[PakFactor]

I saw Dr Kaiser Bengali's talk shows

He said that due to Excessive Tax demands , Businesses are simply closing down

IMF wants either increase taxes or Reduce Expenditure

Now other option to have a balanced budget is to reduce Expenditure

Dr. Kaiser Bengali is a very good economist; sadly, his work was washed away due to nepotism and uneducated morons in office. It was on the Raftar Now channel, where I watched his last interview.

Businesses have no option but to shut down or relocate elsewhere if they can. Pakistan's IT industry is slowly shifting to Dubai; the small-time manufacturing we did is at the point of being gutted, and textile mills are either cutting production, shutting down, or selling assets to pay back debt.

 

[ghazi52]

Pakistan’s bilateral partners to continue rollovers during IMF programme: SBP governor​

Reuters
November 4, 2024

Photo: Reuters

ISLAMABAD: The State Bank of Pakistan (SBP) Governor Jameel Ahmad told analysts on Monday that bilateral partner countries have assured the International Monetary Fund (IMF) they will continue rollovers of their debt for the duration of Islamabad’s bailout programme.

He passed these remarks in a briefing held after the Monetary Policy Committee (MPC) of the SBP announced to reduce the key interest rate by 250 basis points (bps).

In its fourth successive round of monetary easing that began in June 2024, the central bank slashed the policy rate to 15% from previously 17.5%.

 

[ghazi52]

 

[S.Y.A]

IMF wants either increase taxes or Reduce Expenditure

Now other option to have a balanced budget is to reduce Expenditure

the development budget worth 900 billion, maybe more, is mostly wasted and pissed away. need to cut it in half. also reduce luxuries and incentives and allowances of commissioners, judges, generals, politicians and civil servants.

increasing taxes is not the answer. increasing the collection is. the tax thieves are all sitting in the parliament. who will catch them?

 

[ghazi52]

IMF accelerates review of $7 billion bailout​

Sends mission months ahead of schedule to assess Pakistan's performance on targets

Shahbaz Rana
November 06, 2024

ISLAMABAD: The International Monetary Fund (IMF) has decided to dispatch a mission to Pakistan next week four months ahead of its planned schedule to evaluate Pakistan's performance on its $7 billion bailout package. This early review follows Pakistan's mixed performance in implementing agreed-upon conditions.

The IMF Mission's early arrival underscores the importance of the programme for IMF management and board members, while providing an opportunity to reassess targets that, according to Pakistani authorities, may have already become irrelevant one month after the loan's approval.

Diplomatic and government sources told The Express Tribune that IMF Pakistan Mission Chief Nathan Porter will lead the delegation, tasked with reviewing progress on the implementation of roughly 40 conditions agreed upon in exchange for the bailout.

Finance ministry spokesperson Qumar Abbasi did not respond to requests for comment. Officials clarified that the IMF's visit is just to review Pakistan's performance during the July-September quarter.



Pakistan's first-quarter results for the fiscal year were mixed. The State Bank of Pakistan (SBP) met its monetary targets, and the finance ministry exceeded its quarterly budget surplus target. However, the Federal Board of Revenue (FBR) missed its revenue collection target, while provincial governments failed to achieve their collective cash surplus goal due to overspending by Punjab.

The finance ministry's report indicated a shortfall of Rs182 billion, or 53%, in the provincial cash surplus target of Rs342 billion. The government could not support the FBR's efforts to collect Rs10 billion from traders in the first quarter, missing the target by nearly 99.99%.

Official figures show an overall tax collection shortfall of Rs190 billion over four months, with the FBR collecting Rs3.440 trillion against a target of Rs3.632 trillion, despite record-high taxes imposed this year.

Government officials have alerted the media to the anticipated revenue shortfall, attributing it to discrepancies between target assumptions and actual results for the quarter.

In addition, provincial governments missed the end-October deadline to legislate an increase in agriculture tax rates to 45% amid serious challenges from limited cooperation between federal and provincial governments in fully enforcing IMF conditions.

According to a Ministry of Finance report, Pakistan met IMF targets for the primary budget surplus and net revenue collection by the provinces. The federal government achieved a primary surplus of Rs198 billion, with total surpluses reaching Rs3 trillion, or 2.4% of Gross Domestic Product (GDP). This higher surplus was largely due to booking the annual profit of the central bank in the first quarter.

 

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While past IMF reviews were conducted quarterly, for the new programme the parties agreed to biannual assessments. The IMF's staff report, released after the $7 billion loan approval, initially set the date for March 15, 2025, for the "first review and end-December 2024 for the performance and continuous criteria."

However, this mission will arrive just a month and a half after the loan approval and four months ahead of the planned review, examining the results of the July-September targets and progress of the second quarter through October-December 2024.

Outgoing IMF Resident Representative Esther Perez also did not respond to a request for comments on the mission's objectives, given the next review was expected in early 2025.