ISLAMABAD: Finance Minister Ishaq Dar said on Friday the government had not imposed new taxes on agriculture, construction and real estate sectors and would not do so in future as well in the wake of a $3 billion loan deal signed with the International Monetary Fund (IMF) last month.

In a policy statement before the National Assembly, Mr Dar said that to ensure transparency, he was placing the IMF programme documents, including the letter of intent (LOI), Memoran­dum of Economic and Financial Policies and the technical memorandum of understanding, on the parliament record as promised during his budget winding-up speech.

All these documents have already been released early this week by the IMF with the understanding of the government.

The minister said the country’s foreign exchan­­ge reserves had reached $14.2bn — the highest since October last year and almost at the same level when the coalition government had taken over 14 months ago — despite making all international payments to meet sovereign commitments.

The government would ensure that the reserves stay higher or around the same level when it hands over the power to the caretakers, he said.

The minister said a wave of concern had spread among farmers in the rural areas and construction and real estate sector on “incorrect reports” about IMF conditions suggesting new taxes on these sectors.

“I want to make a categorical statement and make you (parliamentarians) a witness that no new tax will be imposed on agriculture, construction or real estate,” he said, adding that difficult times had already passed, all prior actions delivered and all fiscal measures envisaged in the budget had been taken.

These steps, he said, included Rs215bn of taxation measures and Rs85bn of expenditure controls to deliver a total fiscal adjustment of Rs300bn, although the IMF had made three times higher demand.

In Para 4 of the LOI signed by the finance minister and SBP governor with the IMF, the government has reported that, in line with the focus of the new standby arrangement (SBA), it had “already taken a series of important actions”.

The first action among them is the approval of the latest budget by the National Assembly on June 25 in line with SBA and then signed into law the next day by the parliament.

“Our FY24 budget advances fiscal consolidation through a primary surplus of Rs401bn (0.4 per cent of GDP) built on a set of credible measures that help: (i) sustainably raise additional revenue by targeting undertaxed sectors (such as agriculture and construction), broaden the tax base, and improve progressivity; and (ii) restrain non-priority spending (including through energy sector measures aimed at credibly containing energy sector subsidies, the public wage bill, and pensions) while making fiscal room to protect the generosity level of the Benazir Income Support Programme (BISP) Kafalat programme,” the LOI reads. “As in previous years, we are also working with the provinces to sign Memoranda of Understanding (MoUs) with the federal governments on their provincial fiscal targets consistent with the FY24 budget,” it says.

This was misread by some as upcoming taxes.

Mr Dar said the 9th review of the previous IMF programme should have been completed in November, followed by the 10th review in the first week of February and the 11th in June for completion of the programme by the end of June, although the original programme signed in 2019 should have ended in 2022.

Mr Dar said he had invited the IMF mission to visit Pakistan in November last year, which was delayed for three months and the mission finally came to Pakistan from Feb 1-9, but then the lender raised the questions of external financing gap.

During the parliamentary debate on the budget, the authorities remained engaged with the Fund and finally the two sides agreed on a new short-term agreement. If Pakistan failed to clinch that deal, it would have received only $1.1bn under the 9th review and the remaining funds worth $1.4bn would have lapsed as no extension in the loan programme was possible.

The new bailout package was agreed upon to protect not only the $1.1bn of the 9th review of the previous plan but also the entire outstanding amount of $2.5bn with an addition of $500 million, although Mr Dar had pushed for another $1bn increase.

The finance minister said the IMF wanted the new loan deal to be signed for 12 to 15 months, but the government contained it to nine months to cover about two months of the current government, three months of the caretakers and one to two months of the new government to adjust and take an independent decision in future.

He also hoped that the current government’s policies would help reduce inflation to 7pc in two years from over 29pc at the end of the previous fiscal year.

Published in Dawn, July 22nd, 2023