ISLAMABAD, Oct 12: Amid criticism from the IMF over the Special Investment Facilitation Council and Sovereign Wealth Fund, the government has committed to drastically reduce the Public Sector Development Programme, ensure timely tariff adjustments in gas and electricity sectors, bring agriculture and retail sectors into effective tax net and immediately impose or increase withholding tax and excise duties on several items to meet any revenue shortfall.
According to documents released by the International Monetary Fund as part of the recently approved $7 billion Extended Fund Facility, Pakistan has stayed on course of its commitments through a total of 22 structural benchmarks until Sept 25, as the country required about $110.5bn in foreign financing over the next five years (2025 to 2029) at an average of $22bn per year. These needs generally remain funded with some minor gaps over the next two years.
The government has committed to expanding the Tajir Dost Scheme to bring retailers into the tax net to 36 more cities, from six major cities at present, providing about Rs250bn revenue from the scheme this year and growing progressively.
The government has also promised to ensure asset declaration of all government officers (Grade 17-22), but that would not be available to public scrutiny, and accessible to banks, tax authorities and, the financial monitoring unit and the top investigation agency on specific demand.
The government has also committed to privatising four power sector entities during the current year, including two in the distribution and two generation plants.
As part of the contingency plan, the government has committed that should the three-month rolling average revenue collection fall short of the projected target by 1pc, it will increase advance income tax on import of machinery, import of raw materials, industrial undertakings and commercial importers and increase withholding tax on supplies, services, contracts and increase federal excise duty on aerated and sugary drinks.
The IMF staff raised concerns over the establishment of a Sovereign Wealth Fund involving about seven major profitable entities and the creation of the Special Investment Facilitation Council (SIFC).
"Staff has highlighted the need to ensure a level playing field with regard to the investment environment and avoid a watering down in governance standards. These issues remain to be addressed," it said.
However, the government promised to take additional steps to promote investment and ensure competitive neutrality and a level playing field. "We commit to ensuring that the SIFC does not propose, nor that the government provide, regulatory, spending, or tax-based incentives of any sort, or any guaranteed returns, or take any other action that could distort the investment landscape" and to establish a set of best transparency and accountability practices for SIFC operations and ensure that all investment made under the SIFC results from the standard Public Investment Management framework, it said.
The government also promised to amend the 2023 Sovereign Wealth Fund (SWF) Act by the end of December to ensure that its state-owned enterprises (SOEs) revert to the SOE Act's governance structures and to ensure that the SWF itself comes under governance mechanisms and safeguards in line with its principal nature as a holding company.
For the next year, the government committed in advance to introduce a 5pc increase in the FED on fertiliser and pesticides in the FY2026 budget. —Dawn
