PTI government is facing tough choices to revive the staled IMF program

 Power tariff increase,more taxes and full autonomy to State Bank are the main conditions of IMF

PTI government is facing tough choices to revive the stalled $6 billion IMF programe for Pakistan. The government will have to take three tough decisions including hiking power tariff, eliminating tax exemptions/ slapping more taxes and approving legislations to grant autonomy to regulators for reviving the IMF programme.

It will not easy for the PTI government to implement these conditions for mainly two reasons. One-the inflation is already high and hurting the majority of the Pakistani people. The government is already under pressure to reduce the prices and to bring down the inflation. The further increase in power tariff will cause another wave of price hike. There will be backlash from people.

If the government decides to increase taxes or impose more taxes, it will also burden the already struggling masses. The economic crisis is not yet over. The businesses are still struggling to survive. The business community will not accept more taxes as businesses are still at recovery stage after the COVID-19 lockdown.

Two-the opposition parties’ alliance Democratic Movement (PDM) is going to launch a protest movement against PTI government from October 16. The tensions are running high between the opposition alliance PDM and PTI government.

 It will become even more difficult for the government to implement the IMF conditions in the middle of an opposition movement. The opposition will use it against the government. Such tough decisions will have serious political repercussions. It will become difficult to defend such measures  in a polarised political situation.

The IMF has not approved the second review of the 39-month Extended Fund Facility worth $6 billion since February this year due to disagreement over additional tax measures and increase in electricity prices.

The IMF has so far released $1.44 billion to Pakistan in two instalments. The country received the first loan installment of around $1 billion in July, 2019. The second tranche of $452.4 million was received on December 26.

The PTI government is trying to convince the IMF to allow it to increase the prices of electricity in installments instead of in one go.

The government is willing to revive the stalled IMF programme but it was finding out a strategy where tough decisions could be implemented in phases in order to avoid the backlash of both the opposition and masses.

However, the Ministry of Power is going to suggest to Prime Minister Imran Khan and his cabinet to pass on the burden of raising electricity tariff in line with quarterly adjustments within this ongoing month, as internal meetings are underway to make renewed efforts to convince the IMF for passing on partial increase in electricity tariff.

It is yet to see how much the government decides to raise the power tariff. However, top official sources confirmed that without increasing the power tariff on quarterly basis, the IMF program would not be revived.

“The message is loud and clear that the government will have to take a decision on increasing the power tariff soon” said the official.


The FBR had so far netted Rs1004 billion in the first quarter (July-Sept) period of the current fiscal year and surpassed the target by Rs 44 billion. However, tax experts believed that the FBR required Rs1, 000 billion more to fetch Rs4, 963 billion because the FBR had collected Rs3, 980 billion in the last fiscal year.

If the FBR collected Rs 44 billion additional in first quarter how it will be possible to fetch Rs 956 billion more in remaining nine months. Keeping in view this prevailing situation, the FBR will be required to devise a strategy on two accounts either to abolish more tax exemptions and secondly take additional revenue measures to keep the budget deficit within envisaged limit of 7.1 percent of GDP for the current fiscal year.

The third major condition is that Pakistan will have to make progress in showing commitment to pass through legislation for granting autonomy to the State Bank of Pakistan (SBP). Many critics sternly oppose the proposed amendments to the SBP Act 1956 arguing that if such amendments were approved, the central bank would not remain answerable to the prime minister. Some other measures for strengthening other regulators are also part of the IMF programme.

                                                         The Editor


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