ISLAMABAD:

The International Monetary Fund (IMF) has imposed six other conditions on Pakistan, including raising personal income tax rates and electricity tariffs, while blaming Finance Minister Shaukat Tarin’s first budget for increased macroeconomic vulnerabilities.

The IMF on Friday released its detailed report on the health of Pakistan’s economy and the status of the implementation of the $6 billion bailout program which expires in September.

“The approved FY2022 budget marked a deviation from EFF objectives and contributed to the rapid increase in macroeconomic vulnerabilities,” the IMF said while tracing the roots of the crisis in Tarin’s first budget. .

The report further states that the budget “has provided significant fiscal easing through significant spending increases and the cancellation of several EFF tax revenue commitments, despite past revenue underperformance.”

“The (IMF) staff regrets recent policy reversals that undermine the ability of the program to achieve its objectives,” he added.

The report also revealed that Pakistan will have to implement six more conditions until June. Personal income tax rates are tied to the class of employees and individuals doing business.

The government will prepare the personal income tax (PIT) bill this month, according to the report, which will ensure that the new tax legislation is ready to come into effect on July 1 with the budget of the fiscal year 2023, he added.

The IMF has further stipulated that the new personal income tax will reduce both the number of income tax rates and brackets, suggesting that the tax burden of the working class will almost double. Currently, there are 11 tiles with different rates and a maximum rate of 35%. By reducing the brackets, people will fall into the highest tax bracket.

In addition, Pakistan will reduce tax credits and allowances (except those for the disabled and the elderly, and Zakat receipts); introduce special tax procedures for very small taxpayers; and bring additional taxpayers into the tax net.

The IMF has also imposed the condition that by April, the Ministry of Finance and the State Bank of Pakistan (SBP) will establish a Development Finance Institution to support the eventual phasing out of SBP refinancing facilities. .

The new institution will assume responsibility for the SBP’s refinancing program, evaluate the export refinancing program (EFS) by the end of February, and take the necessary steps to improve its effectiveness.

The IMF said that as of September 2021, the outstanding amount of all SBP facilities was Rs 1.22 trillion. IMF staff warned that this expansion, if not temporary, would undermine the SBP’s efforts to credibly implement monetary policy, achieve its primary objective, and improve monetary policy transmission channels. .

The third condition stipulated that by May, Pakistan would complete the first stage of the recapitalization of the two private sector banks which are undercapitalised.

In line with the fourth condition, which Pakistan is already implementing, by the end of January the cabinet will decide on the second stage of energy subsidy reform for residential consumers.

The IMF said the first stage of the September 2021 reforms failed to reduce total net electricity subsidies. Now, as part of the second phase, the government will withdraw the benefit of the previous slab and increase the effective tariff of unprotected slabs by at least 50 paisa per unit.

The next step would be for NEPRA to approve the new tariff structure by the end of February.

By the end of June, the government will seek parliamentary approval of the new law on public enterprises in accordance with IMF recommendations, under the fifth condition.

The last condition stated that by March, the Public Procurement Regulatory Authority will issue new regulations to require the collection for publication of beneficial ownership information of companies awarded public procurement contracts of equal amount. or more than 50 million rupees.