ISLAMABAD: A visiting International Monetary Fund (IMF) delegation on Wednesday expressed satisfaction over the volume of Pakistan’s domestic debt, a finance ministry official confirmed, as the international lender’s representatives holds discussions with Islamabad on key benchmarks of a $7 billion loan program approved in September.
The IMF delegation led by Pakistan mission chief Nathan Porter arrived in Islamabad on Monday on an unplanned visit. The team is expected to hold meetings until Friday with top officials from ministries such as finance and energy and the Federal Board of Revenue, the main tax collection agency, to discuss the performance of a $7 billion loan program approved in September. The IMF has said Porter’s visit is not part of the first review of the loan program, which is not scheduled to take place before the first quarter of 2025.
According to Pakistan’s central bank, the country’s domestic debt rose by Rs7.838 trillion [$28.2 billion] over the past year to reach a total of Rs47.536 trillion [$171.1 billion] in September 2024, up from Rs39.698 trillion [$142.9 billion] in September 2023.
“The IMF delegation and finance ministry officials have discussed the domestic debt portfolio as part of discussions regarding the loan performance,” a finance ministry official told Arab News while seeking anonymity. “The IMF delegation has expressed satisfaction over the [volume] of the country’s domestic debt.”
He said the finance ministry informed the IMF delegation that Islamabad was gradually reducing the volume of its domestic debt and increasing the period of its debt servicing.
“The IMF wants Pakistan to increase the average period of debt servicing as this will help stabilize the economy,” the official said.
He added that the Federal Board of Revenue (FBR) officials also briefed the IMF about the government’s measures to digitize tax collection.
“The briefing is also given on the improvement in the revenue collection after the use of artificial intelligence by the tax collection agency,” the official said. He said the FBR has included over 0.4 million small traders in the tax net during the current fiscal year. These small traders and retailers have deposited Rs12 billion [$43.2 million] in taxes in the first quarter of this fiscal year, he said.
“Some changes in the Tajir Dost Scheme will also be discussed with the IMF to improve the tax collection,” the official said, referring to an FBR scheme that the government has introduced to bring retailers in the tax net via incentives.
The IMF reached a staff-level agreement with Pakistan in July for a 37-month $7 billion bailout package, which the Fund’s Executive Board approved in September. This was the 25th loan program that Pakistan has obtained since 1958.
Islamabad secured the bailout loan, critical to keeping its $350 billion fragile economy afloat, after taking painful measures such as hiking fuel and food prices and implementing reforms to broaden the country’s tax base and privatize state-owned entities.
“INTERIM CHECKS”
Pakistan’s macroeconomic conditions and investor sentiment have improved in recent months, which analysts say has led to a bullish trend in the country’s stock market.
Syed Atif Zafar, the chief economist at Topline Securities, said the IMF delegation’s meetings with Pakistani officials were part of “interim checks” to ensure a successful review of the loan facility next year.
“The government failed to achieve the tax revenue target in the first quarter that has perhaps necessitated this IMF visit, but still the authorities have multiple options and time to overcome this gap,” he told Arab News.
“The good thing at this point is that all structural and quantitative benchmarks of the loan program are on track.”
Tahir Abbas, a senior economist and head of research at Arif Habib Limited, said Pakistan last month requested the IMF for a $1 billion climate financing facility to mitigate climate risk, which would be discussed during the ongoing IMF visit.
“Pakistan’s revenue shortfall of around Rs200 billion ($720 million) in the first quarter has mainly necessitated this IMF visit,” he told Arab News.
“The finance ministry will now inform the IMF delegation about the possible revenue measures to overcome the shortfall and cut the expenditures.”
