Pakistan considers limiting IMF loan package to $10b

ISLAMABAD: Pakistan is considering restricting the $11.3 billion International Monetary Fund bailout programme to less than $10 billion and wants to delay the IMF Executive Board meeting in a bid to gain more time for tax reforms.

Finance ministry sources told The Express Tribune that the government is mulling over taking the meeting of the IMF Executive Board to November instead of end-September or early October. The move is said to have two objectives.

“The primary aim is to deliver on the commitment of tax reforms by buying more time and secondly it will leave no time for the last meeting before the end of $11.3 billion programme in December,” said a key government official on condition of anonymity.

“Pakistan does not want to avail of the last tranche of $1.2 billion due to better position of foreign exchange reserves,” the official added. The IMF loan cannot be used for budgetary support and the money can only be spent on import bills.

Pakistan and the IMF will enter into staff-level talks on August 23 in Washington DC to review the economic performance in the last quarter (April-June) of financial year 2009-10. During the year, the country missed the budget deficit target by a wide margin and ended up with a deficit of Rs909 billion or 6.2 per cent of GDP instead of the target of Rs769 billion or 5.1 per cent. It also could not levy the Value Added Tax (VAT) from July 1.

Pakistan is committed to implementing the reformed GST, which includes withdrawal of tax exemptions on goods and levy of the tax on services, by October. The issue remains unresolved as the Centre and provinces have been unable to sort out differences.