Sources uncover that the IMF mission and monetary group are probably going to conclude MEFP today
Wednesday, November 15, 2023
Talks at the political level are close to success, sources say.
Windfall tax to be levied for financial years 2021, 2022.
The IMF economic team is likely to prepare the MEFP today.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva said a review of political talks with Pakistan should take place this week.
"I expect a deal on the review to come within this week. Any day now," the head of the global lender told Bloomberg on Wednesday, assuring the anchor that a deal was very "close" as Pakistan moved closer to a successful policy-level negotiation with the IMF.
"The Pakistani authorities and the finance minister deserve credit for sticking to the agenda they had in a very difficult time," the IMF chief said.
She went on to say that the main problem in Pakistan is tax collection. "Today, the country collects a 12% tax on GDP. We say [that] it has to be at least 15% to have revenue and keep your economy functioning."
"So please, for the people in Pakistan who can pay taxes, collect them from them," she added.
Meanwhile, officials privy to the ongoing talks between Pakistan and the IMF mission told Geo News, on condition of anonymity, that Islamabad has agreed to impose a 40% windfall tax on banking sector profits under the global lender's terms. to secure the second tranche for a staff-level agreement under the $3 billion standby agreement (SBA).
The IMF mission - led by Nathan Porter - and Pakistan's economic team also completed discussions on all sectors, the sources added.
The Pakistani delegation was led by Caretaker Finance Minister Shamshad Akhtar and included State Bank of Pakistan (SBP) Governor Jameel Ahmad, Federal Board of Revenue (FBR) Chairman Malik Amjed Zubair Tiwan and officials from the Ministries of Finance and Power.
The sources further said that for the financial years 2021 and 2022, tax windfalls of up to Rs 55 billion will be collected. Taxes on profits earned by banks will be received in the month of December.
According to Finance Ministry sources, the Finance Act does not require any changes to introduce a windfall tax on the banking sector.
"However, approval of the federal cabinet will be required for the windfall tax," the sources added.
Additionally, the IMF delegation and economic team are likely to prepare a draft Memorandum on Economic and Financial Policy (MEFP) today, the sources said.
The parties also agreed not to raise the interest rate further, sources in the finance ministry added.
