You are currently viewing IMF and Pakistan Edge Towards Agreement: Tax Reforms, Circular Debt, and Austerity Measures in Focus
Remove term: IMF Reaches Staff-Level Agreement With Pakistan IMF Reaches Staff-Level Agreement With Pakistan

IMF and Pakistan Edge Towards Agreement: Tax Reforms, Circular Debt, and Austerity Measures in Focus

The latest developments regarding Pakistan and the International Monetary Fund (IMF) involve their completion of talks related to the first review of a $3 billion stand-by arrangement. Kristalina Georgieva, the IMF’s Managing Director, expects an agreement on Pakistan’s review to be reached this week. The primary issue discussed was tax collection, with the IMF emphasizing the need for it to be at least 15% of Pakistan’s GDP.

Key concerns from the IMF included Pakistan’s handling of circular debt, the power and gas sectors, and dissatisfaction with Pakistan’s position on external financing. The IMF also expects a revision in Pakistan’s fiscal framework, potentially leading to further increases in power and gas tariffs due to the government’s failure to expand the tax base.

The IMF was not in favor of establishing the Special Investment Facilitation Council (SIFC) due to concerns over transparency and accountability. Meanwhile, Pakistan assured the IMF of implementing austerity measures to control the budget deficit. The caretaker Finance Minister, Shamshad Akhtar, stated that the government would not further burden the masses and that the revenue collection target would remain fixed. Akhtar also mentioned that the IMF had confidence in the government’s measures and was satisfied with programs like the Benazir Income Support Programme (BISP) and development spending.

Businessmen and investors in Pakistan are closely monitoring the progress of the IMF review, with expectations that inflation may have peaked and that future rate hikes are unlikely. However, there is a consensus that significant interest rate cuts are not expected soon. The government has already increased power and gas tariffs, meeting one of the IMF’s key demands, and there is anticipation that the privatization of loss-making state-owned enterprises (SOEs) may accelerate, which could positively impact the stock market​