ISLAMABAD – Pakistan and IMF on Wednesday reached staff level agreement on the first review under Pakistan’s 37 month 7 billion dollars Extended Fund Facility. The both sides reached the agreement after their negotiation successfully concluded.
Nathan Porter led the IMF negotiation team while the agreement for loan is subject to the final approval by the IMF executive board.
The question is that how much money Pakistan will have access to at the initial level after agreement with the IMF.
Upon approval, Pakistan would receive $1 billion under the Extended Fund Facility (EFF).
Besides, Pakistan would be granted $1.3 billion under a 28-month arrangement to address climate change and disaster-related challenges. This would bring the total loan amount under the program to $2 billion.
The Extended Fund Facility arrangement will span 37 months.
Earlier, The International Monetary Fund (IMF) agreed in principle to provide a partial concession on the request of the Federal Board of Revenue (FBR) to reduce the withholding tax rate on property purchases by 2 percent starting from April 2025.
However, the withholding tax rate on sellers would remain unchanged.
The IMF also agreed to reduce the Federal Excise Duty (FED) on property buyers while the tax will still be collected from sellers. Similarly, at the request of the FBR, the IMF has agreed to reduce the tax target for this month (March 2025) by 60 billion rupees.
According to a report, regarding the reduction in property taxes, the FBR requested the IMF to reduce the withholding tax (236C and 236K) on both sellers and buyers. However, the IMF has only agreed to reduce the tax rate for buyers under section 236K by 2%.
The IMF has also granted permission for banks to collect 1,257 billion rupees to reduce the circular debt issue in the power sector.
Meanwhile, Federal Minister for Finance Mohammad Aurangzeb stated that negotiations with the IMF are ongoing, and final efforts are being made for consensus on the staff-level agreement. He added that there is no significant hurdle to the success of the talks, and good news is expected soon. He also mentioned that the economy is facing severe risks from increasing population and climate change.
He further stated that after the devastating floods in Pakistan, only a third of the $10 billion promised by the international community has been received. The government has approached the IMF for the Climate Resilience Fund (CRF), and a positive response has been received. Further progress on this matter is expected in the coming days.
IMF shares MEFP draft with Pakistan to reach agreement for $7bn EFF
