IMF sets condition for $4bn bailout package

Internews/Islamabad

Pakistan will have to make a commitment to the IMF for reviving the dumped Reformed General Sales Tax (RGST) and present it into parliament over the medium term for securing a bailout package of $4 to $5bn, it is learnt.

Without changing the proposed GST rate of 17% in the budget, the visiting IMF team has so far taken a “soft stance” on the promised fiscal adjustments of 2.5% of GDP by reducing the budget deficit from 8.8% in 2012-13 to 6.3% in the fiscal year 2013- 14.

There are some risky external inflows envisaged by the PML-N in the budget so fiscal adjustments of 2.5% of GDP, equivalent to Rs647bn, might be adjusted on lower side, close to 2% of GDP for making projections close to reality.

At the moment, the risky inflows include reimbursement of Coalition Support Fund (CSF) to the tune of Rs112bn, receiving $800mn from Etisalat, auction of 3G licence Rs120bn and some others.

“The IMF’s possible bailout package will be folded into two conditions; one will be related to taxation side including introduction of RGST in next financial year 2014-15, removal of all kinds of exemptions from all taxes and second condition will be related to withdrawal of energy subsidies in a staggered manner under which electricity tariff will be hiked gradually either on monthly or quarterly basis,” said senior official who participated in ongoing talks with the IMF team here yesterday.

The upfront increase in power tariff in the range of Rs6 per unit is not on the cards so slight increase in the range of 50 paisa to 1 rupee on per unit basis will be undertaken in a staggered manner to bridge difference between cost of generation of electricity and recovery.