Agreement reached between the government and the IMF

 Agreement reached between the government and the IMF

Income support levy imposed on individuals and companies earning more than Rs 1.5 crore per annum. Increase in budget volume by Rs 400 billion. Photo: File

 ISLAMABAD: An agreement has been reached between the government and the International Monetary Fund (IMF) to reintroduce a tax on those earning up to Rs 100,000 a month, while a phased imposition of Rs 50 per liter levy on petroleum from July.

 Finance Minister Muftah Ismail told the media after the last round of talks with IMF Mission Chief Nathan Porter that the IMF would consult with the SBP on financial targets. After the agreement, the budget will be Rs 9.9 trillion, which is about Rs 400 billion more than the budget presented by the finance minister on June 10.

 Muftah Ismail had presented a budget of Rs 9.5 trillion on June 10, which was barely 4% more than the revised budget for this financial year. The Federal Board of Revenue's revenue target has been raised from Rs 7 trillion proposed in the budget to Rs 7.440 trillion, requiring a growth rate of 24 per cent, which should not be a problem during double digit inflation.

 In addition, the budget deficit target is maintained at 3.8 trillion or 4.9% of GDP. The government has imposed one per cent income support levy on individuals and companies earning Rs 150 million per annum, 2 per cent on those earning Rs 200 million per annum, 3 per cent on individuals earning Rs 250 million per annum and 4 per cent on those earning Rs 300 million per annum. Decided to charge.

 Earlier in the budget, the government had proposed a revenue rate of 2% for those earning more than Rs 300 million per annum, which would have resulted in an additional Rs 38 billion. The demand to maintain the level of Rs 6 lakh per annum had to be accepted.

 The budget had proposed to exempt annual income up to Rs 12 lakh from tax but Muftah Ismail on Tuesday complied with the IMF's demand and agreed to impose 2.5% income tax on those earning Rs 600,000 to 12 lakh per annum. Of That's still half the rate that people with such incomes are currently paying. The income tax slabs for the higher income group will also be significantly increased.

The IMF will now work with the central bank to finalize targets for net external assets, net international reserves and current account deficits, rather than local assets. The Finance Minister hopes that the Memorandum for Economic and Financial Policies (MEFP) will now be received by the International Monetary Fund by Monday. As a result, the country's currency has had to pay a heavy price and as a result, the loss of investor confidence led to a wave of inflation.

 The PTI and PML-N also had to pay a political price for the delay in this agreement. The coalition government was also delaying the deal more than expected.

 A day earlier, Finance Minister Muftah Ismail had announced the agreement in one day as the government had agreed to increase the tax target to Rs 7.44 trillion and reduce some government expenditure. He had acknowledged these steps and withdrew from the demand of levying Rs 30 per liter levy on petrol and imposing 10 per cent sales tax from July 1. GST on petroleum will not be implemented immediately.

 The budget has been increased to Rs 9.9 trillion because the government had increased its expenditure on salaries and pensions and had set aside Rs 200 billion for emergency expenditure. Rs 530 billion was proposed in the proposed budget. The civil expenditure of the government alone has increased to Rs 600 billion which was Rs 550 billion in last year's budget.

The IMF has also rejected the government's budget proposal, which said it would raise Rs 200 billion for the gas infrastructure development cess as the matter is still controversial and its case is pending in the courts.

 The World Bank's Seventh Review Program has been pending since last March when the previous government announced another amnesty scheme with energy subsidies. Following this announcement, the IMF withdrew from the negotiations. Out of the 6 6 billion deal, 3 3 billion has not yet been given to Pakistan.

 Finance Minister Muftah Ismail has said that he has requested the International Monetary Fund to increase the volume of the program to 8 8 billion and extend its duration till June next year. Under this agreement, the government of Pakistan will also have to increase electricity and gas prices. The Broad Based Agreement and the Staff Level Agreement will now depend on the approval of the IMF Board.

 The government of Pakistan will now have to submit its revised budget, including the Finance Bill 2022, to Parliament for approval. This budget will also have to be approved by the end of this month so that it can be implemented from July 1.

 Sources said that the United States, which is the largest stakeholder in the IMF, has also played an important role in this agreement. The new FBR budget target is set at an average exchange rate of Rs. 212 per dollar.

 The new FBR collection target will be Rs 7.440 trillion, which is 24 per cent or Rs 1.42 trillion more than the current target. As of Tuesday, the FBR had collected Rs 5.86 trillion in taxes. The customs duty collection target was Rs 953 billion. The target for next year's customs duty could be Rs 1.05 trillion. Some additional steps could be taken to increase government revenue.