Washington DC February 7 2022: IMF note key policy reversals in Pakistan's FY 2022 budget such as introduction of new preferential tax treatments for the technology sector, automotive and other export-oriented industries, and certain food products, which breached the related continuous performance criteria and need to be observed strictly.
Reduction of taxes, notably (a) a zero-rate excise on fuel (PDL), which had seen a gradual decrease from PKR 30/liter to zero since December 2020; and (b) a downward adjustment of the GST on petrol and diesel from 17 percent to 16.4 percent. Both actions were intended to offset rising international fuel prices but came with a large revenue impact of almost 1 percent of GDP and against the commitment of not lowering the PDL at the time of the EFF program approval.
IMF also remained concern over reinstatement of zero-rated GST for some domestic industries, which had been removed at the time of the EFF program approval. Omission of PIT and GST tax policy reforms from the budget, which was a key commitment in the second–fifth EFF reviews.
Omission of presenting all guarantees expected to be issued in FY 2022 with the budget, which was a commitment as part of actions to address a recent misreporting.