IMF seeks update on revenue system’s digital overhaul
• Holds introductory meeting with finance minister
• Govt pledges to end gas supply to captive power plants by Jan
• Lender’s team to hold joint session with power and petroleum divisions today
ISLAMABAD: The International Monetary Fund (IMF) has sought a detailed, output-based update on Pakistan’s digitalisation plans for its revenue system, including the use of artificial intelligence to expand the tax base and increase collections.
On the energy side, the country has pledged to halt gas supply to captive power plants (CPPs) by January 2025, redirecting them to the national grid despite a strong pushback from influential rent-seeking industrialists. The IMF has firmly rejected any amendments to this programme benchmark.
The visiting IMF team, led by Pakistan’s mission chief Nathan Porter, held an introductory meeting on Tuesday with Finance Minister Muhammad Aurangzeb. Minister of State for Revenue Ali Pervez Malik, State Bank Governor Jameel Ahmad and Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langrial were also present.
The mission is also holding separate technical sessions with all the stakeholders, including the FBR, power and petroleum divisions and the energy sector regulatory authorities. In all these engagements, the mission appeared to have not expressed its mind so far, except from raising exploratory questions, participants told Dawn.
It is not yet clear if the dialogue would lead to policy-level discussions that had been a critical part of IMF programmes’ quarterly reviews.
The current $7 billion Extended Fund Facility (EFF), however, has been designed in a manner that the IMF and Pakistan authorities should hold biannual review meetings for the disbursement of about $1bn instalments during each cycle.
The first formal review has to take place based on the end-December performance for Pakistan to qualify for disbursement for a second instalment of over $1bn by March 15, 2025.
Officials said the IMF mission has called for detailed explanations on the digitalisation of FBR’s processes for revenue collection, application of artificial intelligence for identifying and tracing tax evaders and their taxable incomes and businesses and involvement of specialised expert firms. They have also sought a complete update on the track-and-trace system.
In initial meetings, the FBR attributed recent revenue shortfalls — particularly in the first month of the second quarter — to the declining inflation.
The power sector’s performance appears to be within agreed limits concerning circular debt and current revenues.
Circular debt rose by about Rs70bn, below earlier estimates of Rs240-250bn. A circular debt management plan was approved only last week by the Economic Coordination Committee (ECC), led by the finance minister.
Sources said the government had been going back and forth over the disconnection of gas supply to inefficient captive power plants, belonging mostly to the textile sector, to utilise surplus capacity in the national power grid.
The industrialists have, however, now mustered support from gas companies. Some stakeholders are now pushing for the supply of imported LNG to CPPs at a weighted average cost of local and imported molecules on the premise that electricity connections were not available or were insufficient in certain areas.
The IMF mission is scheduled to have a joint session with the power and petroleum divisions on Wednesday (today) to discuss their interrelated issues, including circular debt, planned tariff adjustments, loss reduction programmes and recoveries.
Published in Dawn, November 13th, 2024