IMF rejects Pakistan’s circular debt management plan, advises raising power tariff

In order to cap the extra subsidy at Rs335 billion for the current fiscal year, the International Monetary Fund (IMF) has rejected the circular debt management plan (CDMP) that the government had given and requested the authorities to hike the power tariff by Rs12.50 per unit.

Talks on the ninth review are now being held in Pakistan by an IMF team; they will last until February 9 and are anticipated to result in a staff-level agreement between the two parties.

During the second day of technical discussions, the Washington-based lender referred to the amended CDMP as “unrealistic,” which is based on several incorrect assumptions. Therefore, the government would need to make further adjustments to its recommended course of action to limit the losses in the cash-strapped electricity industry.

A fiscal deficit will be worked up between the IMF and the Finance Ministry, and various extra taxing measures will then be finalised through the forthcoming mini-budget.

The international lender has asked Pakistan to impose Rs600–800 billion in additional taxes in the second round of talks to revive the $7 billion Extended Fund Facility (EFF), which has been stalled for months.

According to details, the Federal Board of Revenue held a second round of technical talks with the IMF mission, led by Mission Chief to Pakistan Nathan Porter, on the ninth review of a $7 billion loan programme.

The lender also demanded the government increase tax collection to 1 per cent of the gross domestic product (GDP). Sources claimed that the fund demanded the government fix the next fiscal year’s tax collection target at Rs8.3 billion.