Pakistan, IMF talks hit snag over ₹900 billion fiscal gap - Details

Talks between the International Monetary Fund and Pakistan have hit a snag in the form of a whopping ₹900 billion fiscal gap. While the IMF has called for GST rates to be increased by 1% for petroleum, oil, and lubricant (POL) products, Islamabad is contesting the fiscal gap in achieving the primary deficit.

Pakistani authorities have asked the IMF for incorporating a flow of reduction under the revised Circular Debt Management Plan (CDMP) and reduced the amount of required additional subsidy of ₹605 billion against the earlier target of ₹687 billion. Therefore, the fiscal gap stood in the range of ₹400 to ₹450 billion.

Pakistan's Prime Minister Shehbaz Sharif had earlier said that the government would have to agree to IMF bailout conditions that are "beyond imagination" as it battles a spiralling economic crisis.

As the two entities attempt to strike a staff-level agreement, top officials have also blocked IMF's condition about the signing of Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan for reviving the Fund program. According to local media reports, officials have asserted that no such discussions took place with the IMF review mission.

"Differences still persist over ascertaining the exact fiscal gap between Pakistan and the visiting IMF review mission during the technical levels talks. Once it's finalized with the IMF, then the additional taxation measures will be firmed up, which will be unveiled through the upcoming mini-budget. In view of a lack of reconciliation over the figure of fiscal gap, the technical level talks will continue on Monday and then policy level talks are expected to commence from Tuesday," sources told a select group of reporters.

They said the government agreed in principle with the IMF to abolish electricity and gas tariff subsidies for the export-oriented sector because such kind of dole out was completely unacceptable to the lender.

It is expected that both sides would strike a staff-level agreement by the conclusion of the talks on February 9. The IMF's Executive Board will consider approval of the next tranche in March this year.

(With inputs from agencies)