Pakistan is close to receiving the next tranche of about $1.2 billion from the International Monetary Fund (IMF), while the government’s petroleum levy collections have crossed Rs1.2 trillion, which is being described as a significant step towards achieving fiscal targets.
According to sources, Pakistan has successfully passed the third review of the IMF’s Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF), after which a disbursement of about $1 billion and an additional $210 million is expected.
The IMF had announced a Staff Level Agreement (SLA) on March 27, after which the two sides are implementing policy reforms.
The government has started considering measures such as increasing petroleum levy and eliminating fuel subsidies to meet fiscal targets. The levy target for the current fiscal year was set at Rs 1.47 trillion, while its collection in the first nine months alone has exceeded Rs 1.2 trillion.
Although the government is claiming to provide subsidy on diesel, according to experts, the continuous increase in levy indicates that strict measures are being taken to reduce the fiscal deficit. There are reports that more levy may be imposed on petrol to meet the low collections of the Federal Board of Revenue (FBR) or tax may be re-imposed on diesel.
The Finance Minister said in a recent statement that Pakistan is committed to maintaining fiscal discipline, but also wants some flexibility in the IMF program in view of global and regional challenges, which will be decided in the upcoming budget.
According to the IMF, Pakistan’s EFF program is progressing in line with the government’s goals, which include fiscal stability, inflation control, energy sector reforms and improving social protection. Progress is also being made on climate reforms under the RSF, which aims to increase the country’s capacity to cope with environmental risks.
Economists say that although Pakistan’s economy is showing signs of improvement, ongoing tensions in the Middle East and volatile energy prices could pose a threat to the future.
According to IMF Mission Chief Eva Petrova, after the board’s approval, a total of up to $4.5 billion will be available to Pakistan, which is expected to further restore market confidence.
