IMF demands records of Pakistan’s flood relief expenditures

ISLAMABAD: The International Monetary Fund (IMF) has demanded records of flood rehabilitation expenditures as talks between Pakistan-IMF continued to revive $7 billion Extended Fund Facility (EFF) stalled for months, ARY News reported on Wednesday, citing sources.

According to details, the policy-level talks between Pakistan and International Monetary Fund entered a crucial phase as the IMF mission held a virtual meeting with Prime Minister (PM) Shehbaz Sharif.

Sources told ARY News that the IMF has conditionally agreed to exempt Rs475 in primary budget deficit, making the exemption conditional to verification of flood relief expenditure.

Sources claimed that the lender demanded the records of flood rehabilitation expenditures from Pakistan, adding that the government would have to provide complete monitoring of flood expenditure and details.

During the meeting, the government apprised the lender that primary budget deficit could reach Rs1100 billion rupees, adding that the flood-related expenditures were the major reason behind budget deficit.

As per IMF conditions, the country should achieve a primary budget surplus of Rs153 billion — 0.2 per cent of the national output for the new financial year — to revive the bailout package. However, sources claimed, the government failed to meet the demand.

‘Tough conditions’

International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600-800 billion in additional taxes in the second round of talks to revive $7 billion Extended Fund Facility (EFF).

During the meeting, the Fund set tough conditions for additional measures that included imposing roughly Rs600-800 billion in additional taxes.

Sources told ARY News that Pakistan was willing to impose taxes to the tune of Rs200 billion through a ‘mini-budget’, while the Fund pressed Islamabad to foist over Rs600 billion additional taxes.

The lender also demanded the government increase tax collection to 1 percent of Gross Domestic Product (GDP). Sources claimed that the Fund demanded the government fix next fiscal year’s tax collection target at Rs8.3 billion.

Sources further claimed that the IMF also demanded to end phase-wise incentives of sales tax. It also demanded to increase sales tax on petrol from 11 percent to 17 percent, sources said, adding that Fund demanded to end Rs110 billion relief granted to textiles and other industries.

‘IMF giving tough time’

On February 3, Prime Minister Shehbaz Sharif said the International Monetary Fund (IMF) delegation was giving Pakistan “a tough time” over unlocking stalled loan programme.

Prime minister Shehbaz Sharif made these remarks while chairing an apex committee in Peshawar to mull over strategy following mosque tragedy.

“As you know, the IMF mission is in Pakistan, and that’s giving us a tough time,” he said, adding “Our economic situation is unimaginable.”

“You all know we are running short of resources,” Sharif said, adding Pakistan “at present was facing an economic crisis that’s beyond imagination.”