Pakistan, IMF begin policy talks for $1 billion loan tranche

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have commenced policy-level talks for the disbursement of a $1 billion loan tranche under the ongoing economic programme, ARY News reported on Monday, citing sources.

According to sources, today’s discussions focus on the National Finance Commission (NFC) and agricultural income tax, with officials briefing the IMF that there is a revenue potential of Rs300 billion from agricultural taxation.

A special session on the circular debt management plan is also scheduled. Pakistan has reportedly proposed a Rs1,250 billion reduction in circular debt and is considering borrowing Rs1,250 billion from banks to address the issue.

Sources indicate that this loan would be obtained at an interest rate of 10.8%, while a surcharge of Rs2.8 per unit on electricity consumers is being proposed to repay the bank loans.

The negotiations will also include a dedicated session with NEPRA, where Pakistan will brief the IMF on the implementation of NEPRA’s power tariff decisions. Additionally, discussions will be held on the distribution of revenue between the federal government and provinces under the National Finance Commission (NFC) framework.

Earlier, the federal government has abandoned plans to introduce a mini-budget for FY 2024-25, opting instead for an alternative plan to address the Rs605 billion shortfall.

The government was anticipated to bring the mini-budget but now it opted other option. A key aspect of the plan involves the swift resolution of tax-related cases pending in various courts.

Prime Minister (PM) Shehbaz Sharif has assured full cooperation in this regard, while Chief Justice of Pakistan Yahya Afridi has also approved the request to expedite the hearing of tax-related cases.

According to sources, the IMF has also been briefed on the plan. A crucial hearing on the matter is scheduled to take place in the Supreme Court on March 10.