IMF flags FY24 budget, says tax amnesty against programme conditionality

The International Monetary Fund (IMF) has raised several issues in the fiscal year 2023-24 (FY24) budget tabled by the government in the National Assembly last week but remains ready to work with Pakistan to refine the budget ahead of its passage, the lender’s resident representative for Pakistan, Esther Ruiz Perez, said in a statement late on Tuesday.

A day before the tabling of the budget, Ruiz had said Pakistan needed to satisfy the IMF on three counts, including the budget for the upcoming fiscal year, before its board will review whether to release at least some of the $2.5 billion pending disbursement under the 2019 Extended Fund Facility (EFF) that will expire at the end of this month.

In her latest statement, Ruiz said a new tax amnesty scheme proposed by the government in the budget sets a “damaging precedent” and runs against the programme’s conditionality. The statement did not specify which particular scheme the Fund was taking issue with.

It also notes that the draft FY24 budget “misses an opportunity to broaden the tax base in a more progressive way, and the long list of new tax expenditures reduces further the fairness of the tax system and undercuts the resources needed for greater support for vulnerable BISP recipients and development spending”.

She further said that measures to address the energy sector’s liquidity pressures could be included alongside the broader budget strategy.

The IMF official had earlier pointed out that the lender had time only for one board meeting before the current programme ends. With reserves at critical levels for the past several months, Pakistan was expected to get around $1.2 billion from the IMF in October last year as part of the EFF’s ninth review. But almost 8 months later, that tranche has not materialised as the IMF says Pakistan has been unable to meet important prerequisites.

With the programme just weeks away from its expiry, the ninth review is still in doldrums while the tenth review, which was originally part of the plan, is all but out of question.