Friday, December 24, 2010

Pakistan, IMF to restructure budget yet again

Pakistan, IMF to restructure budget yet again

Pakistan will work out a new macroeconomic fiscal framework, including budget restructuring after seeking an extension in the current Standby Arrangement loan programme of $11.3 billion for nine months from the International Monetary Fund.

“We have asked the Fund that the government needs to complete all the millstones set for the 5th and 6th review, which is why the country needs a nine-month extension,” a senior official told our sources.
Since the RGST is not being imposed from January 2011 in the wake of failure of the government to convince the political parties, the revenue generation required to run the country’s affairs would be badly hurt.
Now both the government and the IMF would sit and restructure the budget again as earlier both sides had agreed on 4.7 per cent budget deficit. The IMF authorities, keeping in viewthe adverse impact of the catastrophic floods, had agreed to raise the fiscal deficit target by 0.7 per cent from the originally budgeted 4 per cent for the current year.
Now under the new scenario, budget restructuring for the next six months of the current fiscal along with more measures to increase revenue generation, which will be impacted because of the failure to impose the RGST, would also be discussed with the Fund, the official said.
Earlier, the government had cut the development budget to Rs140 billion from Rs280 billion and under the new scenario, the government may further cut the PSDP. The official claimed that during the last IMF talks on budget restructuring, some issues were left open-ended, and they would also be discussed.
The official said that Pakistan badly needs revenue generation for which the government was going to increase the 10 per cent surcharge on withholding tax, 2 per cent point increase in withholding tax on imports and possible 1 per cent import surcharge. Moreover, the provincial government will also take revenue generation measures that include increase in stamp duty and vehicle registration fee.

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