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IMF irked by agricultural package, electricity subsidy

International Monetary Fund (IMF) has been irked by the government’s decisions regarding agricultural packages and subsidies for electricity for export-oriented sectors.

A report has claimed that the irked IMF has shown serious reservations against the recently announced packages and has asked the government to reverse the decisions or compensate through new tax measures.

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The government had announced a financial package of Rs1,800 billion for farmers along with electricity supply to export-oriented sectors at Rs19.99 per kilowatt-hour (kWh) which would cost around Rs110 billion.

IMF has asked to reverse the decisions or compensate for the losses with new tax measures (mini-budget) and it will be discussed in the talks on the ninth review that has been scheduled to start soon. The introduction of new tax concessions, exemption of preferential tax treatment or any tax treaty has also been barred by the international money lender.

The government will have to resume the required consolidation so that the primary surplus target of 0.3 percent of GDP could be met. To generate revenue equal to 1% of GDP the government must complete the delayed October PDL adjustment and adhere to all previously agreed hikes. IMF has also asked to expand the number of Benazir Income Support Program (BISP) families to nine million for the protection of social spending.

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Strengthening energy sector viability has also been urged by the IMF and the introduction of new electricity subsidies has been asked to restrain along with a commitment to not fiscalize arrears of the power sector without arrangements with the IMF.

IMF has also insisted on free moving exchange rates while State Bank of Pakistan (SBP) would be required to share AML/CFT inspections of banks for tax amnesty of construction sector.

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