- Potential delay linked to Saudi Arabia’s conditions on the Reko Diq project.
- Sources hint Pakistan has a backup plan if the Saudi oil facility stalls.
- IMF mission discusses external financing amid economic challenges.
ISLAMABAD: The visiting International Monetary Fund (IMF) mission has raised concerns about the execution of the $1.2 billion Saudi Oil Facility (SOF) amid worries that Saudi Arabia may condition the disbursement on progress in the multi-billion-dollar Reko Diq project, potentially leading to delays, The News reported.
Saudi Arabia had initially assured the IMF of the $1.2 billion SOF as part of Pakistan’s $7 billion bailout package, approved by the IMF’s Executive Board a few months ago.
However, the IMF now fears the oil facility may face hurdles, although a delegation from the Saudi Fund for Development (SFD) is expected to visit Islamabad next month.
However, the sources close to the Prime Minister’s Office reveal that Pakistan possessed a Plan-B, which excludes the SOF, but they did not share its details.
In another blow, Pakistan has missed out a Structural Benchmark (SB) for amending the Agriculture Income Tax (AIT) by the four legislating assemblies under the IMF condition till end October 2024.
Although, the provincial cabinets already granted their nod, but, so far, the provincial assemblies had not yet approved the piece of legislation.
Pakistan might have to seek a waiver from the IMF’s Executive Board on this slippage of implementing the SB within the stipulated timeframe.
The IMF explicitly wrote in its staff report that “provincial tax reforms will include the (i) full alignment of their AIT regimes with the federal personal and corporate income taxes by October 2024 (end-October SB) with implementation from January 1, 2025 and collection in July 2025”.
The IMF has pointed out a risk to $2.6 billion for securing external financing arising out of a potential gap for the current fiscal year.
The IMF Staff Mission is becoming stricter in the wake of Executive Board members assessments whereby “directors noted the Ex-post Peer Review assessment and the negative impact caused by deviations from programmed policies, and stressed the importance of strong ownership for programme implementation and financing. They emphasised the need for effective communication to build broad consensus and support for reforms”.
Meanwhile, in another development, Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langrial requested the Senate panel on finance for holding an in camera session when Senator Faisal Sabzwari asked about mini budget under the IMF conditionalities.
The MQM-Pakistan senator stated that he was interested to know whether the AIT was going to be slapped as currently the amount collected through traffic challan in metropolitan Karachi was higher than the collection of the AIT in his province.
The FBR chairman replied that the discussions were underway with the IMF, so it would be appropriate to hold briefing on this issue in camera in next meeting.
Senate Standing Committee on Finance Chairman Saleem Mandviwalla said that the media gets annoyed with in camera sessions but agreed to the request made by the FBR chairman for holding in camera briefing on IMF programme and mini budget.
The Ministry of Finance and the IMF high-ups continued parleys on Wednesday and in the first session the external financing gap came under discussion.
The Ministry of Finance, Economic Affairs Division and State Bank of Pakistan informed the IMF that the China had struck currency swap deal of 3 billion Yuan (approximately $450 million) but they did not entertain the request to increase the currency swap limits.
On Dubai Islamic Bank (DIB), the IMF was told that there was a link of $500 million guarantee from the Asian Development Bank (ADB) and things would be finalised soon.
In the second session, the Ministry of Finance briefed the IMF on domestic borrowing plan envisaging that the debt servicing cost would be reduced in the aftermath of reduction in policy rate from 22 to 15 percent. It would save Rs1.3 trillion in debt servicing bill.
The FBR high-ups claimed that the envisaged tax collection target of Rs12,970 billion would remain unchanged, without explaining that how the tax shortfall occurred in the first four months of Rs189 billion would be bridged in remaining period of the current fiscal year.
They also said that the GST on petroleum products would not be slapped. It’s true because it would become part of the federal divisible pool and 60 percent collected amount can be transferred to the provinces under NFC Award. The option is to jack up petroleum levy.
The FBR high-ups argued that they fetched Rs11.84 billion from retailers in first four months as the number of filers went up from 218,015 in tax year 2023 to 607,685 in 2024 and paid-up tax increased from Rs5.3 billion in last tax year to Rs9.3 billion so far in 2024.
The increase in tax collection stood at Rs4.076 billion.
Under Withholding (WHT) compliance, the retailers/ wholesalers paid up Rs6.7 billion under section 236G of Income Tax Law in 2024 against Rs3.18 billion in tax year 2023.
Under 236H, the retailers paid tax of Rs9.799 billion in 2024 compared to Rs5.6 billion in 2023.
