Dreamed $7b in doldrums, IMF moves draft on revenue generation

As five rounds of technical side of Pakistan-International Monetary Fund (IMF) talks concluded on Thursday, the IMF delegation forwarded a draft of recent Pakistani moves for strengthening revenue collection to its head office.

Islamabad cited parliament’s passage of budgetary proposals to send a strong message to the IMF, including the one to raise the general sales tax in Budget 2013-14, However, IMF’s demand for introducing new taxes worth $75 billion has remained unfulfilled.

The visiting IMF team has forwarded a draft of revenue collection measures announced in the recent budget to its head office in Washington so that the health of tax collection might be analysed.

The Pakistani side has conveyed it to their IMF negotiators that the PML-N-led new government has brought in over Rs 202 billion revenue generation moves in attempt to meet the revenue collection target of Rs 2.475 billion.

IMF negotiators appeared skeptic over Islamabad’s claims, demanding Pakistan to “do more”.

This situation has brought Finance Minister Ishaq Dar to a dead end. Levying new taxes would be a political suicide for him and his party, while not doing so would mean IMF would not assist Pakistan.

The fund is pushing Pakistan to bring down the fiscal deficit to 4.5 percent in the coming years, which seems impossible without removing subsidies or introducing new taxes.

Reportedly, the IMF is also seeking policy proposals from Islamabad for the coming two years in connection with taxation moves, which is an impossible task for the government at present.

The only hopeful outcome in Pakistan-IMF talks at present is that the IMF delegates have given signals of extending the negotiations.