ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to share its draft investment policy and ensure transparency in the Special Investment Facilitation Council (SIFC). The IMF expects inflation to be high around 12.7% for the next budget year 2024-25.
The IMF also wants details about tax exemptions for new Special Economic Zones (SEZs) under the China-Pakistan Economic Corridor (CPEC).
To increase non-tax revenues the IMF suggests raising the Petroleum Development Levy (PDL) to collect up to Rs1.08 trillion next year. They also propose an 18% GST on petrol and diesel. However the government might impose a levy instead so it does not have to share the revenue with provinces.
Currently the IMF team is in Pakistan for an assessment but has not started formal talks for a new bailout package. Both sides have different views on the economic plans for 2024-25. The IMF predicts a GDP growth rate of 3.5% and inflation at 12.7% while Pakistan’s Finance Ministry expects GDP growth between 3.7% and 4% and inflation between 11% and 12%.
For the current year 2023-24 GDP growth is expected to be around 2-2.5% lower than the target of 3.5%.
The IMF estimates debt servicing costs will be Rs9.787 trillion for 2024-25. The final amount will depend on the primary surplus.
Regarding the SIFC, Pakistan told the IMF that a new investment policy is being prepared and will be announced after careful planning. The IMF wants transparency in the SIFC’s operations and information on potential investments and privatisations like PIA and other state-owned enterprises.
The IMF also asked about tax exemptions for new SEZs under CPEC. Pakistan’s Board of Investment said there are over two dozen SEZs with four new ones planned. The government will offer similar tax incentives to these new SEZs.
Although formal talks with the IMF have not started, a Finance Division official said the finance minister is confident that ongoing informal discussions will lead to an agreement after the budget is announced and approved by Parliament.
