IMF forecasts Rs34 billion dip in Pakistan’s FED collection

Pakistan IMF

ISLAMABAD: The International Monetary Fund (IMF) has reportedly revised down the federal excise duty (FED) collection for the current fiscal year from Rs600 billion to Rs566 billion.

The IMF has predicted challenges in achieving the projected FDE collection, primarily due to concerns about the Gas Infrastructure Development Cess (GIDC).

According to sources within the Federal Board of Revenue (FBR), the Fund anticipates a Rs566 billion collection on FED, contrasting the budgeted projection of Rs600 billion for the fiscal year 2023-24.

In the first quarter (July-September 2023-24), the government has reportedly collected Rs127 billion in FED, as per the Finance Ministry’s consolidated fiscal operation. However, challenges are expected in meeting targets within the cigarette sector, where a substantial hike in duties, up to 160 percent, may impact sales. Manufacturers claim reduced sales due to increased production costs, coupled with unregulated smuggling of untaxed cigarettes dominating the market.

Furthermore, the IMF has projected a Rs10 billion decrease in GIDC collection for the ongoing fiscal year compared to the government’s budgetary target of Rs40 billion. Talks during the first review of the Stand By Arrangement (SBA) in November 2023 suggested that the government might only achieve Rs30 billion in fiscal year 2023-24. For the next fiscal year (2024-25), the IMF anticipates Rs35 billion in GIDC collection.

Despite agreeing to a slight increase in tax revenue collection to Rs11.296 trillion from Rs11.261 trillion for the current fiscal year, the FBR’s revenue target remains Rs9.4 trillion. The IMF projects a tax collection of Rs13.177 trillion for the next fiscal year (2024-25). The FBR team committed to increasing the share of direct taxes in revenue to Rs4.230 trillion in the next fiscal year.

IMF tax experts’ team to visit Pakistan next week

Moreover, projections include Rs3.411 trillion in sales tax against budgetary estimates of Rs3.607 trillion for the current fiscal year. The IMF also forecasts Rs1.207 trillion in customs duty against a budgetary estimate of Rs1.324 trillion for the fiscal year 2023-24. Additionally, the IMF projects Rs918 billion in Petroleum Development Levy (PDL) against a budgetary estimate of Rs869 billion.

It’s worth noting that the government cannot impose PDL on petroleum products without parliamentary approval. Notably, the government, under IMF directives, imposed a Rs60 per litre PDL on petroleum products, resulting in a collection of Rs222 billion from July to September 2023-24.

Lastly, non-tax revenue is projected at Rs2.019 trillion against the budgetary target of Rs2.116 trillion for the current fiscal year. The federal share within the non-tax revenue is forecasted at Rs1.811 trillion against the budgetary estimates of Rs1.908 trillion.

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