IMF talks begin, petroleum levy fills treasury but public gets no relief

The IMF budget mission is starting talks with Pakistan from today and this time the government is in a somewhat stronger position. The reason is that in the 9 months of July-March, Rs 1.205 trillion was collected from petroleum levy, which is almost equal to the total collections of the entire last fiscal year and an increase of 45 percent or Rs 371 billion on an annual basis. At present, each petrol consumer is paying Rs 117.5 per liter as levy.

The budget deficit situation was also better than expected. The overall deficit is likely to be limited to 3.2 percent of GDP as against the target of 3.9 percent, which is about Rs 900 billion better than the estimates. There are three main reasons for this, heavy petroleum levy, a significant reduction in interest payments due to a 50 percent reduction in interest rates and a record Cash Surplus of the provinces. The four provinces together generated a Cash Surplus of Rs 1.63 trillion, of which Punjab alone contributed Rs 824 billion.

However, the bitter truth is that the government had the capacity to provide relief to the people, but instead of reducing the burden, taxes were increased.

The scope of the talks will not be limited to budget targets. The IMF mission will also take a briefing on reducing the role of the state in the public sector, legal amendments to liberalize the sugar sector, the strategy after the abolition of the interest system from 2028, and changing the electricity subsidy from a general to a targeted system. After the IMF’s approval, the budget will be presented in the National Assembly next month.