https://arab.news/5t4vu
- IMF’s unplanned visit last week was reportedly prompted by revenue collection shortfall of $685 million during Q1 of current fiscal
- Agreement for a $7 billion loan program approved in September came with tough measures such as raising taxes, privatization
ISLAMABAD: Prime Minister Shehbaz Sharif on Monday called for all sectors to fulfill their tax obligations, days after the IMF concluded an unscheduled visit to Pakistan for discussions on economic policy and reform efforts.
The IMF’s visit last week was widely reported to have been prompted by, among other factors, a shortfall of nearly Rs190 billion ($685 million) in revenue collection during the first quarter of the current fiscal year. The period also saw an external financing gap of $2.5 billion, while Pakistan failed in its bid to sell its national airline, a major setback on the path to privatizing loss-making state-owned enterprises, required by the IMF.
The government wants to increase the tax-to-GDP ratio to 13 percent over the next three years. The ratio stood at 9 percent during 2023-24, according to the Federal Board of Revenue, the country’s main tax collection body.
“Economic development is only possible when everyone fulfills their share of responsibility,” Sharif was quoted as saying in a statement released by his office after he chaired a meeting of his cabinet to review economic policies. “All sectors must pay taxes to contribute to national progress.”
Pakistan’s economy has faced significant challenges in recent years, including high inflation and fiscal deficits. In May last year, the CPI inflation rate hit a record high of 38 percent but has seen a downward trajectory in recent months, moving to 7.2 percent year-on-year in October.
Pakistan has struggled for decades with boom-and-bust economic cycles, prompting 23 IMF bailouts since 1958.
After wrapping up the visit last week, the IMF had said it was encouraged by Islamabad’s reaffirmed commitment to the economic reforms under the Extended Fund Facility its board had approved in September to reduce vulnerabilities.
The external financing gap and failure to sell PIA has prompted fears that Pakistan might need to impose new taxes to bridge the shortfall. But Finance Minister Muhammad Aurangzeb has repeatedly said the shortfall will be met only with enforcement to get people to pay their taxes, implying there would not be any new revenue measures.