ISLAMABAD: Pakistan and International Monetary Fund (IMF) are set to begin virtual talks on 7th review of $6bn Extended Fund Facility (EFF) on Friday (today) with focus on recent expansionary financial package and money whitening scheme announced by Prime Minister Imran Khan.

The discussions would continue for over 10 days, said an official. Pakistan has so far received little over $3bn out of $6bn worth of 39-month programme.

The IMF had earlier expressed concern over expansionary policies adopted in the 2021-22 federal budget which it said had created fiscal imbalances, leading to introduction of mini-budget in December last year to address these slippages.

The IMF had been opposed to the tax amnesty schemes and had also expressed reservations over a similar scheme for the construction sector two years ago.

The Fund revived the EFF after a suspension of over nine months following hard talks over additional tax measures and increasing petroleum levy on oil products at the rate of Rs4 per litre every month until it reached Rs30 per litre.

After initial compliance with the commitments to increase petroleum levy, Prime Minister Khan reversed the progress when he announced Rs10 per litre reduction in petroleum products bringing down levy to zero besides a cut in electricity rates by Rs5 per unit instead of a schedule of increases agreed to with the IMF to address circular debt. The prime minister announced keeping these prices unchanged until next financial year amid surging international oil prices.

Also, the prime minister announced a tax amnesty scheme for six years to encourage wealthy businessmen to invest in the manufacturing sector with no question asked about the source of income.

The IMF is likely to question the government’s changed policy on all these counts soon after the programme was revived with a disbursement of $1bn. The 39-month IMF programme is to come to an end in September 2022.

Published in Dawn, March 4th, 2022