IMF Document reveals strict conditions set for Pakistan

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IMF Document reveals strict conditions set for Pakistan

  • Sharp Tax increases to continue for the next three years
  • Gas, Electricity rates to be adjusted every quarter
  • Pakistan to make full Compliance with FATF 

The IMF Staff Report has revealed that Pakistan has entered a tough era for Tax Collection where Tax Revenue is Expected to increase by Rs. 4.5 trillion in the next three year period. Evidently, the focus of the IMF program is to increase the Tax-to-GDP ratio of the country which is the lowest in the region. IMF wants Tax Net to widen and to increases the Tax Payers.

The Staff Report projects that Tax collection to increase from current Rs3.94 trillion to Rs, 10.5 trillion by end of June-2024 effectively increasing by Rs. 6.5 trillion in five year period. IMF expects that steep increase in Tax is to be made by broadening the tax net instead of raising tax rates. The Tax-to-GDP ratio is projected to increase to 15.3% as compared to 10.3% this year.

Adjustments in Electricity, Gas Rates

The IMF staff report shows an agreement to increase electricity tariff once more in August this year. While the IMF has instructed to review Electricity and Gas tariff on Quarterly Basis.

Previously, the government increased the Gas Tariff for the domestic household by 190% and for Industries by 30% under IMF agreement. Moreover, Electricity tariffs have witnessed different rounds of adjustments in the preceding year.

Also Read: Pakistan agreed to maintain Market Based Flexible Exchange Rate

Foreign Exchange Reserves

IMF assistance package is expected to increase SBP’s Foreign Exchange Reserves from curren t$6.8 billion to $11.18 billion by next year end.

The document also reveals that China has become the largest lender to Pakistan with $21.8 billion lendings out of total $85.4 billion external financings.

IMF Projects that Pakistan has to repay around $37 billion of its foreign debt by the end of three years. Out of this amount, around $14.6 billion repayment belongs to China.

IMF has also stressed on urgency to meet FATF conditions and complying with FATF broader criteria.

Focus on Privatization

The government has also agreed with the IMF to privatise around seven small Public Sector Entities (PSEs) within a year while a complete plan for the privatizing remaining Public Companies will be submitted by September 2020 to highlight which PSEs to be Improved and which PSEs to be privatized.

IMF has also cited that the Government need to work upon improving laws related to Central Bank independence, money laundering, Debt Ceiling, terror financing, Public Companies governance.

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