The International Monetary Fund (IMF) has urged Pakistan to share the draft version of the under preparation investment policy and ensure transparency in the working of the much-hyped Special Investment Facilitation Council (SIFC), with the expectation of CPI-based inflation on the higher average rate of 12.7% for the upcoming budget 2024–25.
The Washington-based lender has also asked about the government’s proposed tax breaks for the Special Economic Zones (SEZs) that will be established as part of the China-Pakistan Economic Corridor (CPEC).
Regarding the target for non-tax revenue, the IMF seeks to maximize non-tax revenue since the proposal being discussed would raise the Petroleum Development Levy (PDL) to increase collection to Rs1.08 trillion in the upcoming fiscal year or impose a carbon levy to make up for the zero percent GST on petroleum products.
The IMF has suggested adding 18% GST on PDL in addition to gasoline and diesel prices. Nevertheless, in order to avoid being given to the provinces as part of the NFC Award’s federal divisible pool (FDP), the government is considering the possibility of imposing a fee.
As a type of evaluation trip, the visiting IMF team has not yet turned continuous discussion into official negotiations with Pakistani authorities to finalize a new rescue package under the medium Extended Fund Facility (EFF).
Regarding the macroeconomic framework for the upcoming fiscal budget for 2024–2025, both parties had opposing opinions. The IMF has rejected the Finance Ministry’s macroeconomic framework and has instead proposed a macroeconomic framework for the next budget for 2024–2025 that projects real GDP growth at 3.5% while CPI-based inflation is predicted to be higher at 12.7%.
A macroeconomic framework was established by the Ministry of Finance, with an average inflation rate of 11 to 12% and GDP growth projected to be between 3.7 and 4%.
Against the stated objective of 3.5%, the provisional GDP growth number for the fiscal year 2023–24 may range between 2 and 2.5% of GDP.
