IMF shows reservations over low tax collection

[Naveed Yaseen]

AHMED MUKHTAR
ISLAMABAD (May 12 2009): Pakistan mission led by Advisor to Prime Minister on Finance concluded talks with the IMF, which has shown serious reservations over low tax collection, sources said. Pakistan's request to enhance fiscal space for next budget at around 4.6 percent of GDP can give some boost to economy by increasing government development spending, which is likely to be finalised in the National Economic Council.

The outgoing tax chief in his last-ditch efforts tried to convince the Fund mission with low GDP growth as key reason of poor collection. The Fund though was convinced on fiscal deficit but was putting stress on no less than 20pc growth in tax collection next year. Low imports helped reduce the balance of payment crisis but caused revenue slippage on the other hand, said a member of the Pakistan delegation.

The Fund mission reasoned to end energy subsidies before June-end and to enhance spending on poverty and social safety nets, which is far less than needed by poor. Tarin was helpful when the Fund was agreed on overall picture of the economy but wants to see some tangible improvement in growth before Stand-By Arrangement is over after 23 months.

Pakistan team also presented a picture of next budget where the IMF was pushing to eliminate exemptions. On the monetary side, it also asked the Finance Ministry to give more legislative autonomy to the State Bank of Pakistan, whose officials agreed and conveyed that work is in progress on that issue. The Fund was told that the fiscal deficit of 3.1 percent is achieved for July-March and for June-end things are well on track.

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