IMF expresses concerns over $1.2bn Saudi oil facility

**ISLAMABAD:** The International Monetary Fund (IMF) mission, currently in Pakistan, has raised concerns over the disbursement of the $1.2 billion Saudi Oil Facility (SOF), fearing potential delays if Saudi Arabia ties the funding to progress on the Reko Diq mining project, *The News* reported.

Saudi Arabia had initially committed the SOF as part of Pakistan’s $7 billion IMF bailout package, approved by the IMF Executive Board earlier this year. However, the IMF now sees possible obstacles in its implementation. A delegation from the Saudi Fund for Development (SFD) is expected to visit Islamabad next month, which may clarify the matter. 

Sources close to the Prime Minister’s Office indicated that Pakistan has a contingency plan, excluding the SOF, but did not disclose further details.

In another setback, Pakistan missed an IMF Structural Benchmark (SB) for revising the Agriculture Income Tax (AIT) by the end of October 2024. Despite approvals from provincial cabinets, the legislation has yet to pass in the provincial assemblies, potentially requiring Pakistan to seek a waiver from the IMF.

The IMF had stipulated in its staff report that “provincial tax reforms will include the (i) full alignment of their AIT regimes with the federal personal and corporate income taxes by October 2024 (end-October SB) with implementation from January 1, 2025, and collection beginning July 2025.” The IMF has also flagged a $2.6 billion gap in securing external financing for the current fiscal year.

As part of recent negotiations, IMF staff members emphasized the importance of consistent program implementation and financing, urging the government to communicate reforms effectively to build support. 

In related discussions, Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langrial requested an in-camera briefing before the Senate finance committee, after Senator Faisal Sabzwari questioned the possibility of a mini-budget under IMF conditions. FBR discussions with the IMF are ongoing, and a closed briefing is scheduled for the next meeting.

During Wednesday’s meetings, the Ministry of Finance, Economic Affairs Division, and State Bank of Pakistan informed the IMF of a currency swap agreement with China worth 3 billion yuan (around $450 million), although China declined to increase the swap limit.

The IMF was also briefed on Pakistan’s domestic borrowing plans, which aim to reduce debt servicing costs through a policy rate cut from 22% to 15%, projected to save Rs1.3 trillion. The FBR expects to meet its Rs12,970 billion tax collection target, despite an Rs189 billion shortfall in the first four months of the fiscal year. 

Additionally, the FBR reported collecting Rs11.84 billion from retailers in the first four months, with the number of tax filers increasing from 218,015 in 2023 to 607,685 in 2024, boosting paid-up taxes from Rs5.3 billion last year to Rs9.3 billion in 2024. The increase in tax collection stands at Rs4.076 billion.

Under Withholding Tax (WHT) compliance, retailers and wholesalers paid Rs6.7 billion under Section 236G of the Income Tax Law in 2024, up from Rs3.18 billion in 2023. Under Section 236H, retailers paid Rs9.799 billion in 2024, compared to Rs5.6 billion in 2023.