Pakistan seeks increase in budget deficit from IMF
Dec 15, 2022
Islamabad [Pakistan], December 15 : Pakistan's government requested the International Monetary Fund (IMF) to grant an adjuster of the Pakistani Rupee (PKR) 340 billion by approving an increase in the budget deficit for the 2022-23 fiscal year, according to The News International.
Pakistan is also considering imposing the flood Levy on those higher income brackets who are earning lofty profits in recent years and also said adjuster will be used to hike the budget deficit target envisaged at 4.9 per cent of GDP on the eve of the budget for 2022-23.
A top official of the government said, "We are considering imposing Flood Levy on those higher income brackets who are earning lofty profits in recent years. We have not yet firmed up modalities but it's actively under consideration at the moment by the higher functionaries of the government."
The Pakistan government informed the IMF bout the expenditures on flood rescue and relief and also about the Benazir Income Support Programme (BISP) and those utilized on relief and rehabilitation during the current fiscal year.
Now the adjuster will be used to hike the budget deficit target envisaged at 4.9 per cent of GDP on the eve of the budget for 2022-23, The News International reported.
Pakistan and the IMF continued ongoing talks virtually. However, differences still persisted over tax collection targets, and non-starter energy reforms including hiking of gas tariff, rising circular debt, and expenditure overrun, making consensus harder to strike on a staff-level agreement for completion of the 9th review under USD 7 billion Extended Fund Facility (EFF).
The IMF had asked Pakistan for hiking the gas tariff because the government kept the gas prices unchanged which resulted in increasing the circular debt of the gas sector.
Although the government made plans for improving the gas sector no progress was witnessed in the power sector. The monster of circular debt in the power sector went up to PKR 2.4 trillion and all targets agreed with the IMF for reducing it on a monthly and quarterly basis could not be achieved. The subsidy on tube wells alone would cause an increase of PKR 200 billion in the accumulated Circular Debt in the ongoing financial year.
According to The News International, the lender raised objections over the Kissan package and the government's decision to grant power and gas tariff reduction for five export-oriented sectors and the agriculture sector.
Meanwhile, IMF's executive board on Monday discussed the surcharges it collects from mostly middle- and lower-income countries, including Pakistan on larger loans that are not repaid quickly, but failed to agree to launch a formal review.
