Pakistan, IMF conclude technical talks on loan review

Pakistan and the International Monetary Fund (IMF) concluded technical-level talks on the first review of the $7 billion loan program on a positive note on Friday.

The policy-level talks for the economic review will begin on Monday.

Sources told Nukta that the visiting delegation of the IMF held meetings with representatives of Khyber Pakhtunkhwa and Sindh governments and discussed agriculture income tax legislation and measures to increase revenue at the provincial levels.

The IMF delegation also met with the officials of the Ministry of Law and Justice and the National Accountability Bureau (NAB) to discuss comprehensive governance and corruption assessment.

During the technical level talks, Pakistan's Federal Board of Revenue also shared the reasons for the over PKR 600 billion shortfall in tax revenue in the first eight months.

The IMF team was informed that the main reasons for the revenue shortfall during the first eight months were lower-than-expected inflation, slow recovery of the large-scale manufacturing sector and lower-than-expected low GDP growth rate. The Pakistani side also shared with the IMF that it expects to collect PKR 157 billion next week, depending on the top court’s decision on super tax cases.

FBR has been collecting tax revenue at a 26% growth rate this fiscal year. If the trend continues, the tax body aims to collect PKR 11,716 billion (US$41.8 billion) by year-end.

Additionally, the FBR has reportedly requested the IMF to lower Pakistan’s tax revenue target for the current fiscal year and the IMF is yet to make a decision on the request.

Reportedly, Pakistan also shared a plan with the international lender about ongoing negotiations to get a PKR 1.3 trillion loan from commercial banks to resolve its bulging energy sector debt.

According to an official from the Ministry of Finance, the government has yet to sign the loan agreement with commercial banks.

Reuters reported on Friday quoting Zafar Masud, chairman of the Pakistan Banks Association, that the interest rate would be a floating exchange rate and the country's top banks would participate in addition to those who are already part of the outstanding loan.

"⁠This will help in clearing up all the debt in the next 4-6 years which has been sitting on banks' balance sheets," he said.

Masud added that more than half of the PKR 1.3 trillion debt is already on the banks' books and is undergoing restructuring through self-liquidating facilities, which currently lack identifiable cash flows to support them.