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Govt, IMF wrap up talks after rare revision of fiscal data
• After being in deficit a fortnight ago, ministry’s figures show Punjab enjoying ‘surplus’
• Climate financing, govt’s request to expand loan size also discussed
ISLAMABAD: Unscheduled weeklong talks between Pakistan and the International Monetary Fund (IMF) concluded on Friday under tight secrecy from both sides, with a rare revision of fiscal data turning Punjab into a cash surplus province from a deficit one only a fortnight ago.
Sources said that Punjab had pitched a Rs200 billion pension provision but was compelled to take it from that head, thus converting its fiscal deficit into a surplus.
The visiting IMF team, led by mission chief Nathan Porter, also focused on Pakistan’s desire to increase its loan programme size and discussed climate financing, under which Pakistan has applied for an additional loan of $1.2bn. The Fund has already extended cheaper climate financing to 20 nations most impacted by climate disasters to build resilience through adaptation.
The IMF staff had a wrap-up meeting with the Pakistani team led by Finance Minister Muhammad Aurangzeb before departure without issuing a customary end-of-mission statement. The Ministry of Finance did not comment on the meeting while participants remained tight-lipped.
Sources said the IMF mission would give its formal feedback to the authorities in a few days, but officials said Pakistan had time until February 2025 to make up for revenue shortfalls that stood at Rs190bn in the first four months (July to October) of the current fiscal year.
The formal review talks on biannual targets would be arranged by the end of February or early March to determine whether Pakistan qualified for the disbursement of a $1bn tranche, subject to compliance with structural benchmarks.
At the last leg of engagements, however, it emerged that Pakistan had met another quarterly target for provincial cash surplus, but only after the Punjab government protested that it had been exposed to disrepute for concluding the first quarter of FY25 with a Rs160bn deficit while it had actually contributed about Rs40bn cash surplus. It argued that a Rs200bn pension fund was only an accounting provision and had not been actually spent.
“The Ministry of Finance endorses the views of the government of Punjab on achievement of a provincial surplus of Rs40bn during the first quarter of FY2024-25,” an official statement said.
It added that the provincial government remained one of the most important contributors to provincial surplus during recent years — for the current fiscal year, it has budgeted a provincial surplus of Rs630bn as agreed with the IMF.
In a rare development, the finance ministry then uploaded a revised fiscal operations data on its website that scaled down a major “statistical discrepancy” of Rs377.6bn on Punjab’s balance sheet to Rs177.6bn.
Still, Punjab’s Rs40bn surplus is the lowest among the three other provinces, which had already complied with their cash surplus commitments.
Sources said that smaller provinces contested the IMF’s desire to pull out of wheat support price or subsidised issue price, insisting that it could create a food security problem, particularly in underdeveloped markets like Khyber Pakhtunkhwa and Balochistan, unlike those visualised by the IMF staff.
It is for the first time that provinces are now directly part of the talks with the IMF under a loan programme.
The general impression from the provinces to the visiting mission was that while the legislation for agriculture income tax was being made, it would be a Herculean task to actually implement it given the capacity constraints and the weaknesses in the land record.
“If the FBR has not been able to ensure compliance with income tax returns in 77 years in the urban centres, it could only be estimated how farmers, most of them illiterate, would file their income tax for agriculture incomes,” an official said.
Even Punjab, which has passed the agriculture income tax from its assembly, has kept the tax rates outside the law with a premise that these would be issued separately through a schedule or rules.
Other provinces had cleared the drafts and promised to pass them into law but would perhaps take into consideration the IMF views on Punjab when available soon.
The IMF team appeared willing to appreciate provincial problems, particularly capacity constraints and promised to support technical consultants, not only for agriculture tax but also for provincial financing to the Benazir Income Support Programme, higher education and devolution of provincial development projects from the federal budget. Sindh has reportedly yet to decide to finance these additional responsibilities.
Sources said Pakistan’s agricultural tax revenue currently stands under Rs10bn, against a potential yield of Rs230bn. Authorities have committed to introducing mechanisms by January 2025 to ensure agricultural tax collection, targeting Rs1 trillion in revenue in a couple of years.
The Ministry of Finance said it shared the updated fiscal operations figures for the first quarter with the IMF on Nov 14 and, “with the concurrence of the Fund”, the ministry has updated the revised figures on its website, showing a provincial surplus of Rs40bn for Punjab.
It added that as per the revised figures agreed with the Fund, the government of Pakistan has managed to achieve a cumulative provincial surplus of Rs360bn against a target of Rs342bn agreed with the lender for the first quarter.
SNGPL clarifies
In a related development, Sui Northern Gas Pipelines Limited (SNGPL) clarified that its requests to gas producers for field curtailments were due to reduced power sector consumption, not unaccounted-for gas losses.
Declining demand for RLNG led to a 150 mmcfd reduction in power sector usage, it said.
Published in Dawn, November 16th, 2024
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