ISLAMABAD: Finance Minister Muhammad Aurangzeb expressed optimism on Thursday about finalizing a $6 billion Extended Fund Facility (EFF) deal with the International Monetary Fund (IMF) within this month, having completed almost all prior actions ahead of time. Additionally, he mentioned reaching an agreement in principle with all provinces over the agricultural income tax.
The government plans to request the IMF to enhance the package with a climate resilience facility (CRF) once the EFF is secured. Aurangzeb discussed these developments after briefing the National Assembly’s Standing Committee on Finance & Revenue, chaired by Syed Naveed Qamar, a former finance minister and PPP member.
Aurangzeb highlighted that while the EFF’s size is yet to be finalized, the government aims to conclude the new program this month and subsequently approach the IMF for CRF augmentation during the first quarterly review. He clarified that climate financing was not part of the ongoing EFF discussions. The CRF, a recent facility, includes about $50 billion in initial contributions from wealthy nations to assist climate-vulnerable countries in implementing climate resilience reforms.
He noted that provinces had agreed in principle to the agricultural income tax, although detailed consultations are necessary due to its provincial jurisdiction. Aurangzeb acknowledged potential resistance to this long-unaddressed tax.
The finance minister also mentioned a slight expected increase in inflation but saw potential for the State Bank to reduce its policy rate. He pointed out recent improvements in macroeconomic indicators and the positive impact of the IMF program on financing from other multilaterals, such as the World Bank’s approval for the Dasu Dam.
Aurangzeb affirmed the elimination of presumptive tax and the imposition of tax on exporters, addressing concerns from exporters while noting the clearance of over Rs260 billion in tax refunds. Additionally, he announced the introduction of a contributory pension system for civil employees from July 1, with a similar regime for the armed forces to follow next year.
Finance Secretary Imdadullah Bosal informed the committee that government estimates put the unemployment rate at 6.3% for 2020-21, compared to higher estimates from the World Bank, IMF, and International Labour Organisation.
Story by Khaleeq Kiani
