Disbursement of the last two tranches of IMF’s Extended Credit Facility (ECF)’ is feared to remain suspended until the government announces an exact schedule for launching the new VAT law.
According to National Board of Revenue (NBR) officials, the IMF’s fifth review mission on ECF informed the NBR that finance division failed to give any date for the start of the VAT reform programme, following delays in floating a new tender of an integrated VAT Administration System, which is supposed to take effect from July next year.
Apart from the two tranches, a fresh deal between the global lender and the government is also likely to be halted if the finance division failed to comply with a major IMF condition, apprehended NBR officials.
The fate of the two installments might be decided in March next year.
Regarding reforms of VAT system, after a meeting with six-member IMF mission headed by Rodrigo Cubero held at his secretariat office on September 23, Muhith had said: The government would not be able to complete VAT reforms this year, which might be extended until 2016. “But I am not sure whether the IMF mission will agree with me.”
The visiting IMF team had already expressed dissatisfaction over sluggish progress in VAT reforms.
“The introduction of a new value added tax, a key government reform to boost fiscal space for development spending, is facing delays,” said an IMF statement.
The persistent revenue shortfalls relative to budget expectations reinforce the importance of pressing ahead with tax reforms, it said.