Pakistan and the IMF held a virtual meeting on Wednesday night, during which the Pakistani side revealed key aspects of the upcoming budget for 2022–23. Major preceding initiatives, including taxing reforms, are expected to bring in Rs7.255 trillion in the upcoming fiscal year, according to the IMF.
At the time of the completion of the sixth review under the PTI-led government in February 2022, the reform of personal income tax was a structural benchmark of the IMF programme. PIT reforms will be implemented in the fiscal year 2023 budget, it was agreed.
However, if the government deviates from PIT reforms now, it would have to devise a new strategy to bring revenues up to the desired level in the following budget.
The IMF has also asked about alternative plans to meet the Federal Board of Revenue's (FBR) envisaged target of Rs7.255 trillion in the coming budget. The IMF has estimated that the FBR’s collection would be standing at Rs6,000 billion for the outgoing fiscal year and the FBR would have to collect Rs1,255 billion to meet the desired target in the next fiscal year.
With nominal growth of 16.5%, the FBR’s collection would touch Rs6,700 billion, so the IMF is inquiring about the plan for collecting the remaining Rs550 billion to touch the revenue collection of Rs7,255 billion for the next financial year.
The IMF staff pointed out that the FBR’s collection of Rs6,000 billion also possessed general sales tax (GST) on petroleum products to the tune of Rs300 billion till November 2021, so keeping in view the existing prices, Rs300 billion should also be excluded from the purview of the FBR. The non-tax revenue target has been envisaged at Rs2,000 billion.
On the expenditure side, the debt servicing has been envisaged at Rs4,000 to Rs4,200 billion for the next budget. The defence allocation has proposed Rs1,523 billion and a development budget of Rs800 billion, including Rs730 billion and a PPP mode of Rs70 billion for the next budget.
Pakistan and the IMF discussed the proposed increase in electricity tariffs, subsidies on price of petroleum products, and the expected budget deficit for the coming financial year 2022-23. The government has envisaged Rs578 billion for subsidies on electricity as Rs500 billion subsidies proposed for FY23, RLNG to get Rs20 billion subsidies and Rs50 billion subsidies for the industrial sector.
Pakistan and the IMF remained engaged on one of the toughest rounds of parleys for finalising budgetary figures for the upcoming budget amid lingering severe macroeconomic and fiscal crisis being faced by the country. This crisis-like situation aggravated owing to sky rocketing petroleum product prices and commodities prices in the international market.
The government is providing a subsidy of around Rs9 per litre on petrol and Rs23 billion per litre on diesel on the basis of calculation of oil prices in international market standing at $107 per barrel. Now the petroleum product prices in international market stands at $122 per barrel so the cost of subsidy is all set to further go up by $15 per barrel in line with new estimates for requirements in the coming financial year.
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