Pakistan’s Budget 2023-24 Faces IMF Criticism: Ministry Provides Clarifications
In response to the International Monetary Fund (IMF)’s reservations about Pakistan’s budget, the Finance Ministry has emphasized that the document is not part of the pending ninth review and is actively working towards a mutually agreeable solution.
Ninth Review and Technical Issues
The Finance Ministry clarified that the ninth review had already taken place in February 2023, where all technical matters were promptly addressed. The remaining concern was external financing, which was amicably resolved after Prime Minister Shehbaz Sharif held discussions with the IMF managing director.
Engagement with IMF
Although the budget for FY24 was not part of the ninth review, the ministry stated that it shared the budget numbers with the IMF mission as per the Prime Minister’s commitment. The ministry also highlighted that continuous engagement with the IMF regarding the budget is ongoing.
Broadening the Tax Base
Regarding the IMF’s concern about broadening the tax base, the ministry highlighted that the Federal Board of Revenue (FBR) has added 1,161,000 new taxpayers over the past 11 months. This ongoing exercise aims to increase the tax base further. The introduction of a 0.6% advance adjustable withholding tax on cash withdrawals over Rs. 50,000 is seen as a significant step in this direction.
Tax Exemptions and Growth
The ministry emphasized that the tax exemptions announced in the budget act as growth triggers for the real sectors of the economy. These exemptions are expected to generate employment opportunities and improve the livelihoods of the common citizens. The ministry also clarified that the budgetary allocation for tax exemptions is relatively small.
Pro-Poor Initiatives
Addressing concerns about the Benazir Income Support Programme (BISP), the ministry stated that pro-poor initiatives in the budget extend beyond the program’s beneficiaries. The budget includes Rs35 billion for targeted subsidies on essential food items through the Utility Stores Corporation, benefiting families with a PMT scorecard up to 40. This facility is also available to BISP beneficiaries.
Amnesty and IT Ordinance
Regarding the amnesty, the ministry explained that the only change made is to “dollarize” the value of an existing provision in the IT Ordinance. The facility, available under section 111(4) of the IT Ordinance, had a cap of Rs10 million (approximately $100,000) introduced in FY2016. The resolution now aligns the cap with the rupee equivalent of $100,000.
Commitment to IMF Program
The ministry assured that the government is fully committed to the IMF program and intends to complete the ninth review at the very least. The coalition government has already made difficult decisions in this regard and remains dedicated to reaching an amicable solution with the IMF.
IMF Public Criticism of Pakistan’s Budget
The International Monetary Fund recently expressed dissatisfaction with Pakistan’s budget for the fiscal year 2023-24. The IMF highlighted missed opportunities in broadening the tax base, reducing tax expenditures, and complying with the fund’s conditions for tax amnesty.
Refining the Budget
The IMF stated its readiness to work with the government in refining the budget before its passage through the Parliament. The lender stressed the need to address the energy sector’s liquidity pressures and make improvements to the budget strategy.
Stay Informed with Pakweb.pk
Stay updated on the latest developments regarding Pakistan’s budget for 2023-24 and the IMF’s criticism. Pakweb.pk provides comprehensive coverage of the issues, including clarifications from the Finance Ministry and insights into the ongoing discussions between Pakistan and the IMF.
Published in PakWeb, June 17th, 2023.
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