IMF Presses Pakistan to Curb Circular Debt, Maintain Fiscal Stability

The International Monetary Fund (IMF) has urged Pakistan to maintain fiscal stability, contain rising circular debt in the energy sector and identify alternative revenue sources if the government considers reducing the petroleum levy.

The IMF mission is in Islamabad for the fourth review of Pakistan’s Extended Fund Facility (EFF) arrangement and the third review of the Resilience and Sustainability Facility (RSF).

According to sources, the visiting IMF mission stressed during talks that sustained measures would be required to maintain fiscal stability amid the country’s growing debt burden.

The mission also called for steps to contain circular debt in the energy sector and asked authorities to identify alternative sources of revenue to offset any potential reduction in receipts if the petroleum levy is lowered.

Pakistani authorities assured the IMF that the structural reform process would continue despite the ongoing Gulf war and its impact on the economy.

Officials told the mission that increases in international fuel prices would be passed on to consumers, while targeted subsidies have been introduced to protect vulnerable segments of society from the impact of higher energy costs.

Pakistan Could Receive Around $1.2 Billion

According to the finance ministryr, Pakistan could receive approximately $1 billion upon the successful completion of the Extended Fund Facility (EFF) review and another $200 million following the review under the Resilience and Sustainability Facility (RSF).

Successful completion of both reviews could therefore pave the way for the release of approximately $1.2 billion to Pakistan.

FBR Briefs IMF Mission

On the first day of talks between Pakistan and the IMF mission in Islamabad, the Federal Board of Revenue (FBR) briefed the delegation on measures related to customs and income tax, according to sources.

The IMF mission was also briefed on measures requiring government employees to disclose their assets.

Officials informed the mission that the government would be able to regulate and monitor the financial conduct of public servants, while details of their assets would also be made available on a website.

Government officials in grades 17 to 22 would be required to publicly disclose their assets, according to sources.