IMF deal to pump foreign exchange reserves by $5.5 billion

Karachi, June 22, 2022: A successful IMF deal will not only unlock a disbursement of $900mn from IMF, but will also be followed by China debt rollover of $2.5bn and Saudi fund rollover of $2bn immediately.

This will pump SBP foreign exchange reserves by almost $5.5bn in the coming two months.

Progress emerges on IMF talks

The most awaited IMF deal seems to be witnessing a breakthrough as recent news flows suggest the Fund and government agreeing to the proposed changes in the Federal Budget FY23.

The government’s tax revenue target is reportedly revised up by Rs 422bn from the previous target to Rs 7.4trn, with an unchanged Primary Surplus at 0.2% of GDP.

Potential tax changes

Poverty Alleviation tax in slabs: The Poverty Alleviation tax, previously announced at 2% on individuals and corporates earning Rs 300mn/annum or more would likely be applied on a slab-based working now, albeit, on Tax Year 2022 profits.

The slabs may start form Rs 150mn with the tax charge starting from 1%.

PDL target revised downward: Despite increase in tax revenue target, a key change is the downward revision in the PDL, a non-tax revenue, to Rs 550bn from Rs 750bn announced in the Federal Budget FY23. The strategy of resuming PDL is also said to be at a gradual pace, rather than a sharp increase of Rs30/ltr from July 1. Some news flows suggest a levy of Rs5/ltr, which would increase up to Rs50/ltr over time.

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