Islamabad:
Pakistan on Friday informed the International Monetary Fund (IMF) that he will not be able to achieve the fiscal objective of RS3.1 billion of this quarter, but hoped to recover the deficit through inflation, economic growth and the highest imports of solar panels.
In an informative session to the IMF delegation, the tax authorities said that the objective from July to September would be lost by a significant margin. In a separate meeting, the power division informed the lender about developments in the electricity sector, particularly the liquidation of the circular debt of RS1.25 billion through bank loans.
The conversations are carried out for the release of a loan section of $ 1 billion under the installation of extended funds (EF) and another $ 220 million under the resilience and sustainability center (RSF).
During the meeting with the Federal Income Board (FBR), the IMF asked about income projections and flood impacts on this fiscal year collection. The Government has established the annual objective of RS14.13 billion, which can also be lost as last year when the FBR fell short for more than RS1.2 billion.
Against July to September of RS3.08 billion, the FBR said that the IMF collection can remain below RS2.95 billion, Fuentes said. The Government hoped to recover the November deficit once economic activities are recovered.
Similar hopes were made the last fiscal year, but they remained breached.
Although next week there will be a separate session on macroeconomic projections, the tax authorities consider that the economy grows more than 3% in this fiscal year despite floods. They also projected inflation collection due to supply interruptions related to floods, fountains said. These two factors can compensate some income losses.
The Customs Department informed the IMF about the implications of the reduction of regulatory tasks. He said that import tax collection increased by 16% during the first two months. The authorities expected contingency measures to be necessary to compensate for tax reduction.
Imports grew 9% in terms of dollars and in two digits in terms of rupee, compensation for tax cuts.
It was told to the IMF that RS190 billion projected through compliance measures will be paid with annual returns. The government expects the 10% tax on sales in the old Fata also to increase the collection.
The FBR also had to go back from an immature proposal to add a fair market value estimated in tax statements.
After the false PAS, Prime Minister Shehbaz Sharif formed a committee chaired by the Minister of Law, Senator Azam Nazeer Tarar, to examine the new column in the tax declarations of the IRIS that requires that the archivators declare the estimated market value of the assets, the evaluation implications and recommend corrective measures.
The committee met on September 26. After deliberations, he recommended eliminating the column in the interest of simplifying the presentation. The recommendation was presented and approved by the Prime Minister.
The FBR had affirmed that the column was only for the collection of data to support the economic survey, not the income or the tax obligation. But the claim did not remain on the road.
The tax authorities expected the increase in solar panel imports would compensate for deficits. The IMF had budgeted RS18 billion revenues of the 10% tax on solar imports. In the first two months, around RS6 billion were already collected, sources said.
However, the FBR feared a drop in tax collection through electricity invoices due to the fall in the demand of the national network. The demand for the network is falling due to prices, deceleration and the highest policies promoted by the IMF Ministry, the World Bank and energy.
Meanwhile, Energy Minister Sardar Awais Ahmed Khan Leghari said that the current structure of net solar measurement remains a critical challenge for sustainable reforms. He has repeatedly declared the net measurement in its current form raises a financial imbalance that affects the broader consumer base.
Power’s division said about 350,000 solar net measurement consumers benefit from favorable repurchase rates, with the cost indirectly assumed by another 35 million of other consumers.
Insequible energy prices have forced consumers to change solar energy, and the government is struggling to attract them as distribution companies face the fall in residential demand.
Power’s division also informed the IMF about the progress in the solution of the circular debt through loans, the reduction of line losses and the improvement of invoices recovery. But there are concerns about sustainability.
He said that the Government has already saved RS175 billion due to the fall of interest rates and other RS242 billion by reducing theft and technical losses.
PM advisor on privatization, Muhammad Ali, said the president of HBL, Sultan Allana, gave full support in the name of the banks to increase the debt of RS1.25 billion for eliminating the fees of energy producers.
“This trip began with our meeting with the president of HBL, who assured us of full support in national interest,” said Ali. He added that although the banks initially wanted a smaller number, they finally agreed with the justification, supported by the Minister of Finance and the leadership of the State Bank.
The IMF was told that the union loan of RS1.225 billion billion was organized with the participation of 18 banks. The reimbursements will be carried out from a dedicated surcharge already integrated into invoices, guaranteeing predictability for the lenders and minimizing the tax burden.
The installation addresses the circular debt of RS1.225 billion through the structured Islamic financing of Bai Mujjal, financing Ijara and floating sukuk bonds in the stock market.
The financing has been ensured at a rate of 0.9% below Karachi Interbank rates offered (Kibor) for a maximum of six years. The reimbursements will be made by charging RS3.23 in each unit consumed by customers who pay.
According to the agreement, the debt will be eliminated in less than six years, with the savings of RS350 billion that are transmitted to consumers. The agreement also saves RS377 billion in backward payment surcharges, reduces the cost of circular debt by 1.5% and the cost of financing of execution by 1.5% per year.
“The vision of the prime minister was that the consumer should be the winner of this exercise,” said a special prime minister assistant.
