ISLAMABAD: The economic assumptions used to finalize the $7 billion agreement with the International Monetary Fund have failed within a month of its approval. This leaves the government with only 2 options to renegotiate the agreement or continue to strangle the economy through more taxes.
According to official data, 4 key assumptions were made to achieve the tax target of around Rs 13,000 billion – economic growth rate, inflation, mass production and imports – but 3 of them proved incorrect by the end of the first quarter of this fiscal year. have been proven.
The federal government made excessive promises from the four provincial governments and the provincial governments are also constantly struggling to fulfill these conditions since the implementation of the agreement.
From the official statistics of the first quarter (July to September), it was revealed that no target could be achieved from the tax collection target of the Federal Board of Revenue to the provincial cash surplus.
Deputy Prime Minister Ishaq Dar has also spoken out against the market-fixed exchange rate system, another key target of the $7 billion program. The IMF is again pressuring Pakistan to further devalue the rupee even though the rupee has already depreciated by at least 16 percent according to Ishaq Dar.
Many predicted serious problems with the implementation of the IMF agreement as soon as the IM agreement was reached, which indicates how badly the negotiators on both sides had executed it.
Pakistan has finalized a botched deal with the IMF that could quickly derail. Sources said apart from the assumption of GDP growth rate of 3 percent, the other three independent indicators of growth, inflation, imports and mass production, have significantly lagged behind targets in the first quarter.
Average inflation stood at 9.2 percent in the first quarter against the expected inflation rate of 12.9 percent. This development came amid the Finance Ministry’s new inflation forecast for October. It said in the monthly outlook report, “Inflation is expected to remain in the range of 6-7 percent in October and further increase to 5.5-6.5 percent by November.” will decrease”.
Similarly, a 17 percent increase in imports was used to reach the tax collection target of Rs 13 trillion, but imports grew by only 8 percent in the first quarter due to weak demand. The growth in mass production also stood at 1.3 percent in the first quarter against the estimate of 3.5 percent.
FBR has already shown a tax reduction of Rs 90 billion in the first quarter. Internal estimates indicate that the tax shortfall could go up to Rs 350 billion to Rs 400 billion by December this year. Have to reopen or keep chasing unrealistic goals.
For the current financial year, the IMF has given a tax target of 12 thousand 902 billion rupees, which the government implemented and imposed additional taxes of at least 1002 billion rupees with the promise of additional collection from traders and businesses.
The impact of a modest increase in prices (GDP growth excluding inflation) is estimated at Rs 1057 billion for the current financial year. Of this, the impact of inflation in the first quarter was estimated at Rs 281 billion but the actual impact was barely Rs 130 billion due to single digit inflation.
The impact of independent growth for the second quarter is estimated at Rs 484 billion but its actual value cannot be more than Rs 230 billion. Publicly available indicators suggest that the FBR may incur an additional shortfall of Rs 125 billion in sales tax and excise duty.
The impact of import pressure is estimated at Rs 320 billion after accounting for all import taxes. Some of these negative impacts will be offset by additional revenue of around Rs 225 billion due to higher tax rates.
Provincial governments also failed to show the required cash surpluses of Rs 342 billion and remained short of the target by Rs 182 billion in the first quarter. Due to which additional target of basic budget will be further damaged. Provincial governments also reluctantly signed the national fiscal deal, while some more important terms will be dropped in the coming weeks.
