recorder report
ISLAMABAD: The International Monetary Fund (IMF) put up three new structural benchmarks with respect to taxation, energy and public debt management.
On the basis of Pakistan’s performance under the extended arrangement, staff supports the authorities’ request for modifications of the end-June Net International Reserves (NIR) Performance Criteria, and completion of the seventh review under the arrangement.
Staff also recommended the establishment of the end-September 2015 performance criteria establishment of a new indicative target on accumulation of arrears in the power sector; setting of three new structural benchmarks, and the revised timeline of structural benchmarks as proposed, according to the IMF staff report on seventh review under the extended arrangement and modification of performance criteria. The IMF put up three new structural benchmarks;(i) Federal Board of Revenue (FBR) will adopt a new audit policy by end September 2015 that will move towards risk-based auditing while mitigating the risk of legal challenges. The measure will improve tax compliance and enforcement; (ii) To appoint risk management staff (director and two staff) by end October 2015 and begin publishing quarterly debt management risk reports covering all government liabilities including guarantees, as defined in the TMU, to allow monitoring of fiscal and financial risks and the implementation of the MTDS. The measure will improve public debt management; (iii) Determine and notify multi-year tariffs for FESCO, IESCO, and LESCO, as defined in the TMU by end-November 2015 to facilitate privatization of the DISCOs and reduction of energy arrears.
The report further states that all end-March 2015 quantitative Performance Criteria (PCs) were achieved as well as the indicative target (IT) on cash transfers under the Benazir Income Support program. The Indicative Target on federal tax revenue was missed by a small margin, reflecting legal challenges to some of the tax measures and the negative impact of lower global commodity prices.
The authorities have taken action to improve revenue and remain on track to meet the end-June 2015 fiscal deficit target. The end-March 2015 Structural Benchmarks (SBs) to (i) draft legislation to remove the authority to grant new administrative tax exemptions (ii) reorganize the debt management office, and (iii) review to simplify tax payment processes were all met. Going forward, the authorities propose: an adjustment to the end-June PC on net international reserves (NIR) to reflect higher reserves accumulation by the State Bank of Pakistan (SBP); end-September PCs; a new IT on accumulation of arrears in the power sector; and three new SBs in the areas of tax administration, debt management, and the power sector.
Discussions focused on: (i) end-March 2015 fiscal performance and the outlook for the remainder of the fiscal year; (ii) the draft FY2015/16 budget and measures to bring the fiscal deficit to 4.3 percent of GDP, including an adjustor of 0.3 percent of GDP for one-off priority spending on security enhancements related to fighting terrorism and resettlement of internally displaced persons; (iii) addressing arrears in the power sector; (iv) saving the windfall from falling oil prices to strengthen external buffers; (v) progress on safeguarding financial stability; and (vi) structural reforms in the energy sector, privatization, central bank independence, anti-money laundering framework, public debt management, trade, and business climate to unlock Pakistan’s long-term growth potential. Outreach activities included a joint press conference with the finance minister, TV and print media interviews, donor meetings, and roundtables with students and the donor community in Islamabad.
