Pakistan to implement new set of IMF conditions under $6 billion loan program

The International Monetary Fund (IMF) headquarters building is seen in Washington, DC on May 15, 2011. (AFP/FILE)
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Updated 06 February 2022

Pakistan to implement new set of IMF conditions under $6 billion loan program

  • Country expects 0.3 percent of GDP in revenue gains in FY 2024 through personal income tax reforms that reduce the tax slabs 
  • Under energy subsidy reforms, government will lower threshold for protected consumer slab to 200 units from 300 units 

KARACHI: The Pakistani government will be implementing another set of International Monetary Fund (IMF) conditions as part of the $6 billion loan program, an IMF report has suggested, with financial experts doubting the country’s ability to achieve the growth rate target.
The IMF has asked Pakistan to implement seven conditions, including personal income tax (PIT) reforms, electricity rate hike, cut in the slab for lifeline consumers, phasing out of refinance schemes, and recapitalization of two private banks, before the next performance review that is expected in April this year, according to a report released by the IMF this week along with $1 billion tranche of the revived $6 billion program.
People familiar with the development say the conditions already existed, but the government might have preferred to implement them in a “phased manner” instead of instant enforcement.
“There was no surprise on the conditions among the government quarters in Islamabad. It means these conditions were initially existing and government had requested to implement them in later stages,” Dr. Vaqar Ahmed, joint executive director at the Islamabad-based Sustainable Development Policy Institute (SDPI), told Arab News.
“It was not possible for the government to enforce all the conditions at once, so they have sought time to implement in a phased manner.”
As per the new conditions, the government has agreed to reform personal income tax “to change the existing tax rate structure by reducing the number of rates and income tax brackets (slabs) to simplify the system and increase progressivity,” the IMF report says.
“The authorities are in the process of drafting PIT legislation by end February 2022 to ensure it will be ready to come into effect on July 1, 2022 with the FY2023 budget,” it says, adding it will reduce both the number of rates and income tax brackets, and bring additional taxpayers into the tax net.
The income tax reforms, said to be protecting the low-income households, are estimated to yield 0.3 percent of the gross domestic product (GDP) in revenue gains in Fiscal Year 2024.
Economists say the new measures are likely to burden those who are already paying taxes, but government officials maintain they would target the ones out of the tax net.
“The measures will be burdenizing the existing segment of tax payers, because a majority of those who have filed new tax returns have filed zero income,” Dr. Ahmed said.
Muzzamil Aslam, a spokesman for the Pakistani finance ministry, said the draft for the reforms had yet to be made, however, those out of the tax net would be tapped.
“We have to increase the income tax and those who are out of tax net will be targeted, and for that a formula will be developed, the work on it has not begun yet,” Aslam told Arab News.
Under the energy subsidy reform for residential consumers, the government is planning to lower the threshold for protected consumer slab to 200 units from 300 units per month, and the breakdown of unprotected 301-700 unit slabs into smaller slabs of 100 each as well as an expansion of the definition of lifeline consumers (to include residential consumers with a consumption of 50-100 units per month) by the end of February.
“The problem is that in our country around 70 percent of the connections fall into the lifeline category. Due to this, our recovery ratio declines,” said Aslam, who also speaks for the energy ministry.
“People have more than one connections and that way they remain below the 300-unit threshold, so we have to see the circular debt and recoveries.”
The IMF has also asked the authorities to “unwind” lending to the housing and construction sector, saying: “Banks’ housing lending targets could present risks to financial stability and entail a misallocation of credit.”
Ahmed said rolling back these measures would be a blow to the prime minister’s Naya Pakistan Housing project.
He feared the implementation of the new IMF conditions, including increasing the power tariff, would impact the purchasing power and make it difficult to achieve the growth rate of 4.5 percent set by the central bank.
“I don’t think that the projected growth rate will be achieved with the implementation of these conditions by April, when the next review is due,” the expert said.
But the finance ministry spokesperson insisted the government would achieve 4.8 percent growth rate against the IMF’s projection of 4 percent. 
The IMF report also points to a change of the Pakistani finance minister and presentation of the budget for the current fiscal year by the new finance chief, Shaukat Tarin. 
It “marked a departure from EFF (Extended Fund Facility) objectives and contributed to rapidly increasing macroeconomic vulnerabilities,” it reads.
“The budget delayed key reforms and reversed some key policies, damaging revenue prospects.”


In rare move, court orders ex-PM Khan aide’s police remand for another two days

Updated 11 sec ago

In rare move, court orders ex-PM Khan aide’s police remand for another two days

  • Dr. Shahbaz Gill was arrested last Tuesday over televised comments media regulator says were ‘seditious’
  • Senior PTI leader Fawad Chaudhry seeks judicial inquiry into alleged torture of Gill during police custody

ISLAMABAD: A local court in the federal capital on Wednesday remanded Dr. Shahbaz Gill, a senior Pakistan Tehreek-e-Insaf (PTI) leader and former prime minister Imran Khan’s chief of staff, in police custody for two days for investigation in a sedition case.

Gill was arrested last Tuesday afternoon, a day after he made a controversial comment in a talk show aired by a private news channel, asking army officers not to follow orders of their top command if they were “against the sentiments of the masses.”

The country’s national media regulator described the statement as “seditious” and said it was tantamount of inciting revolt within the military. The regulator also issued a show-cause notice to the channel, ARY News, for airing the “illegal” content. The channel has since been off air. 

Last Friday, after Gill had been in police custody for two days, the court sent him to jail on judicial remand, rejecting a request by the police to extend the suspect’s physical remand. Islamabad Advocate General Jahangir Khan Jadoon filed a plea in the Islamabad High Court on Saturday last week challenging the order and saying the physical remand of Gill was important to help complete the investigation.

Prosecutor Raja Rizwan Abbasi on Wednesday urged the court to allow physical remand of the suspect as investigators have yet to recover his mobile phone and conduct a polygraph test. In a rare move, the court accepted the demand for another round of police remand. 

“We are yet to investigate the person who approved the script [of what Gill said on TV show],” Abbasi told district and session judge Zeba Chaudhry during the hearing.

Gill’s counsel Barrister Salman Safdar opposed the prosecution’s plea for physical remand and said he had already faced torture by police last week.

“Shahbaz Gill has been tortured in police custody,” Safdar said, referring to a previous period of physical remand, adding that Gill was blindfolded when subjected to torture: “Even his private parts were tortured in custody.”

After hearing arguments from both the sides, the judge first reserved the verdict and later announced that Gill should be handed over to police on physical remand for 48 hours.

Meanwhile, senior PTI leader Fawad Chaudhry called for an independent inquiry.

“A judicial inquiry should be conducted and an independent board should be constituted on which both Shahbaz Gill and prosecution have the trust,” he told reporters.

PTI chairman Imran Khan wrote on Twitter he was “very concerned about Shahbaz Gill being sent into police remand again.”

“He is in a fragile state of mental & physical health because of the torture inflicted on him when he was abducted & taken to undisclosed location & then again at the police station,” Khan said.


Pakistan to host ten international cricket teams over next 4 years

Updated 37 min 4 sec ago

Pakistan to host ten international cricket teams over next 4 years

  • Cricket-obsessed Pakistan will also host Asia Cup and Champions Trophy during this period
  • Pakistan has struggled to convince international players to visit since attack on Sri Lanka team in 2009

ISLAMABAD: Pakistan will host ten test playing nations between 2023 and 2027, the Pakistan Cricket Board (PCB) said on Wednesday as it unveiled the country’s cricketing schedule under the next Future Tours Programme.

International cricket teams stopped visiting Pakistan after a 2009 attack on Sri Lankan players in Lahore and Pakistan hosted most bilateral international series in the UAE.

However, international matches partially resumed in May 2015, when Zimbabwe toured the South Asian country, followed by other international teams. 

Early this year, the Australian team visited Pakistan in February for their first cricket tour in nearly 24 years and later West Indies played three one day matches in Pakistan in June.

“The PCB has scheduled around 238 days of international cricket during the four-year period comprising 27 ICC World Test Championship fixtures (13 home and 14 away), 47 One-Day Internationals (26 home and 21 home) and 56 Twenty20 Internationals (27 home and 29 away),” PCB said in a statement.

“Pakistan’s FTP 2023-2027 reflects that it will play hosts to 10 out of 12 ICC Full Member nations for the first time in more than two decades.”

Pakistan will also host major cricket events like the Asia Cup and Champions Trophy. 

“Pakistan will host the Asia Cup 2023 and triangular series in February 2025 in the lead up to the ICC Men’s Cricket World Cup 2023 and the ICC Champions Trophy 2025, respectively, it will play 11 T20Is against the Netherlands, Ireland and England in the build up to the ICC Men’s T20 World Cup 2024, which will be jointly hosted by the United States and the West Indies,” PCB said.

“I am sure that our cricket fans will be delighted to know that top-ranked and attractive sides such as Bangladesh, England, New Zealand, South Africa, Sri Lanka and the West Indies will visit Pakistan to compete in matches for the ICC World Test Championship,” PCB Chief Executive Faisal Hasnain said.


Pakistan fulfills another FATF condition, makes currency declaration mandatory for air travelers

Updated 17 August 2022

Pakistan fulfills another FATF condition, makes currency declaration mandatory for air travelers

  • No passenger will be able to board a flight or leave the airport without submitting the declaration form
  • The global financial watchdog praised Pakistan for implementing its recommendations in its last meeting

ISLAMABAD: The Civil Aviation Authority (CAA) of Pakistan has made it mandatory for all incoming and outgoing passengers to fill out a currency declaration form, said an official statement on Tuesday, to meet yet another requirement of the Financial Action Task Force (FATF).
Pakistan has been on the international watchdog’s “grey list” of countries since 2018 due to inadequate controls over money laundering and terrorism financing.
However, the country moved closer to exiting the list in recent months after implementing FATF recommendations to strengthen its financial system.
The Paris-based international watchdog also praised Pakistani officials for making substantial progress while saying its team would soon carry out an onsite visit of the country.
The CAA notification on Tuesday said no passenger would be allowed to board a flight or leave the airport without submitting the declaration.
“For inbound flights, airlines are required to ensure in-flight announcement by the flight crew for every inbound flight for submission of subject declaration wherein the passengers will mention the currency under the regulatory requirement of FATF,” the notification informed.
“The said declaration will be deposited at the customs counter before the immigration desk at international arrival,” it added.
The CAA said airline staff and travel agents should provide a copy of the declaration form to all potential passengers who intend to be on an outbound flight while booking their tickets.
“At check-in counters, airlines are directed to issue boarding pass only once the passenger has deposited the declaration with the them,” the notification added.


Pakistan's finance minister criticizes manufacturers for importing parts instead of building them

Updated 54 min 11 sec ago

Pakistan's finance minister criticizes manufacturers for importing parts instead of building them

  • Miftah Ismail says cellphone manufacturers were only adding five percent value to their products
  • He points out that automobile manufacturers had not exported cars to lucrative destinations in 30 years

ISLAMABAD: Federal Minister for Finance and Revenue Miftah Ismail on Wednesday highlighted the structural problems of the country’s economy, saying that Pakistani companies preferred to import parts of their products instead of manufacturing them indigenously at home.

The government recently imposed a temporary ban on the import of luxury items since it was facing a massive current account deficit along with dwindling forex reserves and a rapidly depreciating currency.

The finance minister issued the statement against the same backdrop while addressing a conference of business leaders in the federal capital where he specifically mentioned the country’s cellphone and automobile manufacturers.

“We have given subsidies and 10 percent duty advantage to mobile industry to manufacture phones in Pakistan but their value addition is not more than five percent,” he said. “They get all of their parts from outside and only assemble them here. We have given double duty protection than its value addition and the same thing holds true for car manufacturing companies as well.”

Ismail noted that automobile manufacturers had been working in Pakistan for more than 30 years, but they had not exported vehicles worth a single dollar.

“Pakistani companies are selling inside the country only, though they should try to sell [their products] in rich markets of the United States, Europe and far eastern countries,” he added. “They sell locally to earn more profit because it is a protected market.”

The minister pointed out that out of Pakistan’s $30 billion exports, around $20 billion were generated by the textile sector.

“We import $80 billion worth of goods from abroad which is unsustainable,” he continued. “Our industries have to increase exports instead of only making local sales.”

Ismail also maintained that agriculture was the backbone of Pakistan’s economy, though he added it needed more innovation by adopting advanced Agri-Tech.

“My focus is to strengthen our agriculture as we have imported $450 million tons of wheat this year and more is still required,” he said.

The money spent on the import of wheat, the minister continued, could be used to support farmers and introduce latest technology in the sector.


Pakistani minister promises voting rights to overseas nationals while visiting Saudi Arabia

Updated 17 August 2022

Pakistani minister promises voting rights to overseas nationals while visiting Saudi Arabia

  • The interior minister met expats in Jeddah where he described overseas Pakistanis as country’s ‘assets’
  • The kingdom is home to the highest number of Pakistanis living abroad, making it the biggest source of remittances

ISLAMABAD: Federal Interior Minister Rana Sanaullah told a group of Pakistani nationals in Saudi Arabia on Tuesday the government was finalizing the modalities of voting process for citizens living abroad ahead of the next general elections that are scheduled to take place in August next year.

The minister, who went to the kingdom to perform Umrah, met with representatives of Pakistani community in Jeddah where he described the overseas nationals as “the country’s assets.”

Saudi Arabia has the highest number of Pakistani expatriates, making it the top source of remittances for the South Asian country.

“The government will ensure that overseas Pakistanis manage to use their voting right in the coming elections,” the interior minister said, adding it was “finalizing the modalities of the voting procedure.”

Pakistan’s ruling coalition revoked the voting right of overseas Pakistanis in May by passing the Election Amendment Bill, 2022, which also prevented the use of electronic voting machines (EVMs) in general elections.

The country’s ousted prime minister Imran Khan’s administration sanctioned the use of EVMs during a joint parliamentary sitting in February, though its political rivals resisted the move and vowed to challenge it in the country’s top court.

“Overseas Pakistanis are our best national asset,” Sanaullah said. “Their remittances are key for the economic stability [of the country].”

Discussing the Pak-Saudi ties, the minister said the kingdom had always helped Pakistan in the most difficult of situations.

“We are grateful to the Saudi government for providing employment opportunities to Pakistani workers and professionals,” he added.