IMF officials concerned over poor performance of Discos

In the latest round of negotiations between the Government of Pakistan and the International Monetary Fund (IMF) aimed at securing $1 billion loan tranche for Islamabad, focus was laid on bringing down the electricity tariff by Rs1.50 to Rs2 per unit, reported NewsHD TV channel on Tuesday, quoting its sources.

According to the sources, the government would have to put forward a plan regarding privatization of Discos and the final decision to lower the basic electricity tariff will be taken next month.

The IMF, the sources, was not satisfied with the performance of the Discos, rather the Fund has conveyed its concern over the losses of the power distribution companies.

The government, however, submitted a plan to the IMF for privatization of three Discos – IESCO, FESCO and GEPCO – in the first phase.

For the second phase, LESCO, MEPCO and HESCO are lined up, the sources added.

The IMF officials insisted that there would be no improvement in the energy section until the Discos were privatized. The poor performance of the Discos is the biggest obstacle in implementing the reforms in the energy sector, the IMF officials added.

Briefing on agri income tax

Pakistan and the International Monetary Fund (IMF) engaged on Tuesday in intense policy negotiations as Islamabad informed the IMF about historic legislative reforms aligning agricultural income tax rates with the corporate sector.

Sources said Pakistan assured the IMF review mission that all four provinces have enacted crucial laws to increase agricultural income tax rates, ensuring uniform taxation nationwide.

Under the new taxation framework, Pakistan disclosed to the IMF that agricultural income up to Rs 600,000 annually remains tax-free. Earnings between Rs 600,000 and Rs 1.2 million will be taxed at 15%.

For income between Rs 1.2 million and Rs 1.6 million, a fixed tax of Rs 90,000 will be applied, alongside a 20% tax on earnings exceeding Rs 1.2 million in this slab.

Those earning between Rs 1.6 million and Rs 3.2 million annually will pay a fixed tax of Rs 170,000, with a 30% levy on income surpassing Rs 1.6 million in this range.

A fixed tax of Rs 650,000 applies to income between Rs 3.2 million and Rs 5.6 million, while earnings above Rs 3.2 million in this bracket will be taxed at 40%.

The highest tax slab imposes Rs 1.61 million on agricultural income up to Rs 5.6 million, with a 45% tax on amounts exceeding this threshold.

During the negotiation session on March 8, Pakistan firmly rejected the IMF’s demand to increase the petroleum levy by another Rs 10, reported the 24NewsHD TV channel.

Islamabad also turned down the IMF’s proposal to impose a carbon tax as technical-level discussions concluded, setting the stage for policy-level negotiations beginning Monday. The IMF also suggested increasing federal excise duty on cars, a proposal that remains under discussion.

Meanwhile, the IMF praised the Sindh government’s economic performance, acknowledging that it achieved most of its financial targets in the past eight months. Sindh posted a surplus of Rs 264 billion in the first half of the current fiscal year.

The IMF urged Sindh to boost funding for education, healthcare, and clean drinking water while improving conditions in underprivileged districts.

On March 7, an important meeting between the IMF delegation and Punjab government officials reviewed the implementation of IMF guidelines. While the IMF expressed satisfaction with Punjab’s fiscal policies, it advised the province to slash unnecessary expenditures and continue pension reforms.

Sources confirm that IMF officials scrutinised Punjab’s financial strategies and emphasised the need for strict fiscal discipline.

In a separate meeting with federal officials, the IMF rejected Pakistan’s request to extend the winter relief package for industrial and agricultural sectors throughout the fiscal year, a significant setback for businesses relying on energy cost subsidies.

Reporter: Waqas Azeem