Govt may seek new IMF programme

ISLAMABAD: The government is expected to seek a fresh programme from the International Monetary Fund with a pre-condition of introducing the controversial reformed general sales tax on goods and services and provincial taxes on agricultural income and real estate from July 1.

A senior government official told Dawn on Monday that a visiting mission of the IMF and the government had finalised monthly budgetary targets for the current month.

The successful achievement of these benchmark targets will enable the IMF mission to seek a formal fifth review of the macroeconomic and fiscal framework by the IMF executive board in May, leading to disbursement of the next $1.7 billion tranche before the next budget.

The official said the two sides had also discussed the possibility of adjustment of the sixth and final tranche of about $1.7 billion against repayment of the first instalment of IMF loan due in February next year.

The introduction of RGST and provincial taxes and adjustment of the final tranche of standby arrangement would become a basis of the next IMF programme, the official said.

An expected agreement on monthly fiscal targets and their successful achievement will enable the authorities to get a letter of comfort from the IMF to ensure budgetary support from the World Bank, Asian Development Bank, Islamic Development Bank and other lending agencies and countries.

The government direly needs a budgetary support from these institutions to contain fiscal deficit below 5.5 per cent for the current year and then for the next two years of medium-term budgetary framework, although the country is well placed on
foreign account.

The three institutions have been holding back about $500 million each because of suspension of the IMF programme since May last year.