IMF stresses Pakistan to mobilise "additional financing" by extending tax circle

Following the deal with the cash-strapped country, the International Monetary Fund (IMF) has stressed Pakistan for "additional financing" by sustained implementation of the new $7 billion loan and extending the tax circle.

In a recent statement issued on Friday, the IMF acknowledged the country’s efforts to achieve financial stability in nine months of 2023 and set new targets for the new bailout programme.

The statement shared that the key priorities under the new EFF-supported programme are “rebuilding policy-making credibility and entrenching macroeconomic sustainability through the consistent implementation of sound macro policies and a broadening of the tax base.”

“Advancing reforms to strengthen competition and raise productivity and competitiveness, and reforming SOEs and improving public service provision and energy sector viability” were the second and third priorities set by the global loan lenders.

The Executive Board also stressed “building climate resilience.”

The IMF also emphasised to "enhance revenue mobilisation by expenditure management,” which is critical to achieving fiscal sustainability.

The global loan lenders suggested generating the targeted revenue could be possible by “broadening the tax base, removing special sectoral regimes, and placing a fairer burden on previously undertaxed sectors (including industrialists, developers, and large-scale agriculture).”

“Complementary institutional and structural reforms will focus on strengthening federal and provincial institutional arrangements, improving tax administration and compliance, and making public investment management more effective,” it added.

The IMF welcomed the government and SBP's efforts to control inflation with declining interest rates and building forex exchange.

Additionally, it also appreciated the timely increase of tariffs, which it described as a main source to control circular debt in the energy sector “as deep cost-side reforms are critical to securing the sector’s lasting viability and reducing its costs.”

The IMF’s statement was issued following the approval of a 37-month bailout program, under which Pakistan received a $1 billion first tranche.