1 billion dollar IMF Tranche conversations end ‘successfully’

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Islamabad:

Finance Minister Muhammad Aurangzeb has said that conversations between Pakistan and the International Monetary Fund for over $ 1 billion tranche remained successful and a formal communication of the fund will be released today (Saturday).

The Minister of Finance gave the declaration during a meeting of the Prime Minister’s House, which Shehbaz Sharif was chairman of hearing the complaints of business, according to the government sources.

Shehbaz Sharif asked from his finance minister if the IMF handed over the Memorandum of Economic and Economic Policies (MEFP) to Pakistan – the set of political documents that define the conditions for loan tranches.

Everything is okay and the IMF would release the statement on Saturday, Aurangzeb is said to have told the prime minister in the presence of business Friday.

Aurangzeb did not respond to a request for comment whether he made these comments at the meeting. However, the several sources present at the meeting confirmed it for the Express Pakinomist.

It has also been decided to increase the petroleum tax for RS70 per year. Liter – RS10 higher than existing rates – and use the funds to reduce power prices, the sources said. The tax increases to absorb price reduction, they added.

Pakistan and the IMF negotiations were held from March 3 to 14 for the first review of the extended fund facility (EFF) for the current financial year in July. Prior to the Eff mission, the IMF also held meetings for Climate Resilience Facility (CRF).

It is expected that the IMF Board would consider Pakistan’s request to end the first review of a value of over $ 1 billion in May. It will also approve the new CRF program worth over $ 1 billion in the first week of May, the Ministry of Finance said.

Eff Tranche will be released in May following the board approval, but payments under the estimated climate facility of $ 1 billion will be linked to the actual expenses of the climate -related initiatives.

The Ministry of Finance’s sources said that before the IMF’s departure, a broad deal of MEFP had reached and the final version will be ready within a month. Then the case is circulated for approval by the board, which is expected to take it up in early May.

Grid tax

On the last day of negotiations, the IMF held a final meeting with the Minister of Finance and the Finance Secretary. Sector meetings were also held at Pakistan’s request to reduce the amount of new RS791 per year. Million British Thermal Unit (MMBTU) Grid Levy with approx. RS250 for RS300. Both sides also gave final touches to the changes in Pakistan Sovereign Wealth Fund Act to bring it in line with the IMF’s prescription.

The sources said the petroleum department took the question of the recently introduced tax with the IMF and requested it to lower the rates by connecting it with the average electricity price instead of peak load rates.

The sources said the IMF did not accept the government’s request and said the higher rates were needed to force the industries to switch on the electricity grid by giving up gas -fired internal power production plants.

Last week, the government announced an increase in gas prices of 23% for the industrial captivity works (CPPs) by imposing RS791 per year. MMBTU tax.

Following the introduction of the new tax, the total gas prices for the captivity power plants have risen to RS4,291 per year. MMBTU, as the government also had increased gas rates for the said category after the RS500 a few months ago.

Gas prices are now even higher than the imported LNG prices – a policy aimed at forcing the industries to switch to the national network. However, people are reluctant to buy lattice electricity due to exorbitant prices, which are the results of the transfer of the sector’s inefficiency to consumers and wrong energy policies.

The government will increase the lattice tax by 10% in July 2025, followed by 15% in February 2026 and an additional 20% in August 2026 and takes the final price close to RS6,000 to make the gas supply penalty for the industry to switch to the national power network.

During the meeting with business, the Lahore-based industrialists complained over 600 imported goods containers that were stuck in Karachi. PM instructed FBR to clear these loads this weekend and report back.

New taxation policy

The sources said the discussions were also held in the tax policies for the next financial year. Pakistan asked the IMF that in order to end the difference in taxation policies, 18% VAT should be applicable to the import level with a deduction enforced in subsequent retail steps.

The imported items are already taxed by 18% except a few items that create distortions and encourage the use of imported raw materials over locally available goods.

FBR assured the IMF that it would remove VAT and income tax distortion to end the culture for rent search, the sources said. Discounts currently available to a few sectors will also be withdrawn in the next budget, the sources said.

Carbon Levy

The sources said that understanding in principle has also managed to beat the carbon tax with effect from July. The tax is intended to deter the use of fossil fuels and promote persistent technologies.

Ironically, the government virtually scraped the net dosage of solar panel policy and introduced the gross measurement concept by separating the price of solar -generated devices and the imported units from the national network.

IMF wants to impose RS3 per Liter of carbon tax on gasoline and diesel from July this year, which is increased by another RS4 in the financial year 2027.

The IMF did not accept Pakistan’s perception that the carbon tax will affect the poor and lower middle class and can also have political consequences. The government was also of the opinion that fuel needs were inelastic and that the tax cannot reduce it, but the IMF did not agree.

The fund also ignored the government’s claim that Levy will increase the smuggling of cheap oil and that it cannot accelerate switching against electric vehicles.

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