Business

IMF divided over request by Pakistan, other borrowers to suspend surcharges

Published

1 year ago

Farwa

Argentina, Pakistan, others pushing IMF to drop or waive surcharges
US, Germany, Switzerland and other oppose change
IMF estimates surcharges will cost affected borrowers $4 billion

WASHINGTON: The International Monetary Fund’s (IMF) executive board on Monday discussed the surcharges it collects from mostly middle- and lower-income countries on larger loans that are not repaid quickly, but failed to agree to launch a formal review.

Argentina, Pakistan and others are pushing the IMF to drop – or at least temporarily waive – the surcharges, which the IMF estimates will cost affected borrowers $4 billion on top of interest payments and fees from the start of the COVID-19 pandemic through the end of 2022.

The United States, Germany, Switzerland and other advanced economies oppose a change, arguing that the fund should not change its financing model at a time when the global economy is facing significant headwinds.

An IMF spokesperson said the board discussed potential changes to the policy during its regular review of the global lender’s precautionary balances, but failed to reach consensus on reviewing the policy.

“Overall, views on changes to the surcharge policy continued to diverge, including on the merits of a temporary waiver of surcharges,” the spokesperson said.

No details were provided, but the fund said it would publish a staff paper and a press release in coming days that would provide a fuller account of the board’s deliberations. No date was set for any further board discussion.

Kevin Gallagher, who heads the Global Development Policy Center at Boston University, said big shareholders should rethink their opposition, given the global economic outlook.

“This is the most urgent time to address a fundamentally flawed business model where the IMF is generating revenues by taxing those most in need,” Gallagher said.

But it was notable, he said, that the IMF’s shareholders had failed to outright reject a review.

“One silver lining is that the biggest shareholders … didn’t have enough strength to kill the proposal,” he said.

Stalemate persists between IMF and Pakistan

Talks between Pakistan and IMF are at a stalemate with global lender pushing Islamabad on policies and reforms needed to keep the bailout programme’s targets on track and complete the pending ninth review.

“… a key purpose of program reviews in Pakistan, as in all program countries, is to evaluate both program performance to date, as well as, forward-looking, whether the program is on track or policy measures are needed to meet program targets, advance reform objectives, and maintain macroeconomic stability going forward,” Esther Perez Ruiz, IMF’s Resident Chief in Pakistan, said in a written reply.

An IMF review for the release of the next tranche under bailout funding has been pending since September.

The broader agreement on the revised macroeconomic framework could pave the way for evolving consensus on a staff-level agreement for the completion of the 9th review under the $7 billion Extended Fund Facility.

Business

FBR Reforms: PM Leading Reforms Process with Law Minister as Top Priority

Published

23 hours ago

Farwa

According to Federal Law Minister Azam Nazir Tarar, Prime Minister Shehbaz is leading the entire reform process, and the Federal Government has made the reforms at the Federal Board of Revenue its top priority.

According to the law minister, who was speaking at a press conference in Islamabad, there are presently one billion rupees worth of tax cases pending in court. The parliament has for the first time passed legislation on tax tribunals in an effort to streamline and accelerate the legal process.

He stated that, strictly according to merit, there have already been a few postings and transfers in the FBR and that more are anticipated in the next few days.

Federal Information Minister Atta Tarar, who accompanied the Law Minister, stated that Prime Minister Shehbaz Sharif is spearheading an effective foreign policy through productive meetings with world leaders.

He declared the premier’s trip to Saudi Arabia, where Shehbaz Sharif met with government representatives and corporate executives who indicated interest in investing in Pakistan, a success.

Atta Tarar also declared that a commercial team from Saudi Arabia would be visiting soon.

Business

Pakistan will host an IMF team in May to discuss a new loan.

Published

23 hours ago

Farwa

According to sources, negotiations on a fresh loan program have been set between Pakistan and the foreign lender. There will be two stages to the meetings: technical discussions and policy-level conversations.

Prior to the upcoming negotiations, Pakistan must overcome formidable economic obstacles, including the collapse of an IMF-proposed tax amnesty program.

Although it hasn’t worked, the federal government had promised to include 3.1 million merchants in the scheme’s tax net. The recent turnover of senior officials has placed the Federal Board of Revenue (FBR) in an atypical position.

The negotiation process with the IMF will be difficult for the new and inexperienced FBR team. The significant drop in FBR’s tax collections would likely worry the IMF.

A day prior, Pakistan obtained the eagerly awaited $1.1 billion last installment from the IMF as a component of the $3 billion standby agreement.

Special Drawing Rights (SDR) 828 million, or $1.1 billion in worth, were given to the SBP “after the successful completion of the second review by the Executive Board of IMF under Stand By Arrangement (SBA),” according to the SBP.

Finance Minister Muhammad Aurangzeb stated Islamabad might obtain a staff-level agreement on the new program by early July. Pakistan is seeking a new, longer-term, and larger IMF loan.

Although Aurangzeb has neglected to specify the specific program in question, Islamabad has stated that it is seeking a loan for a minimum of three years in order to support macroeconomic stability and carry out long-overdue and difficult structural reforms. Should it be approved, Pakistan would receive its 24th IMF bailout.

Business

In FY2024, SRB tax revenue soars to Rs 185.2 billion.

Published

24 hours ago

Farwa

In a statement released here, the SRB’s chairman, Wasif Memon, stated that he briefed Sindh Chief Minister Syed Murad Ali Shah about the organization’s revenue collections during their meeting.

In comparison, the tax collection during the same period of the previous financial year 2022–2023 stood at Rs143.3 billion. This achievement represents a 29 percent year-over-year growth, according to the Sindh Revenue Board (SRB), which recorded record revenue of Rs185.2 billion during the first nine months of the fiscal year 2023–2024.

The CM stated at the time that the SRB has shown tenacity and efficiency in revenue collection in spite of facing a number of difficulties, including the general economic downturn.

According to the statement, SRB’s monthly tax collection for April 2024 was Rs18.8 billion, a 23 percent increase from the Rs15.2 billion collected in the same month the previous year.