The dreaded time, discussions with the International Monetary Fund (IMF) for review, is upon the government again. It is a time of stress—the government aims to secure the release of the sixth tranche under the $6 billion Extended Fund Facility (EFF), by the end of this month.
The IMF-designed programme, which was signed by the government in 2019 for a $6bn EFF arrangement has been temporarily halted for three months as the government implements its indigenous policy measures to increase revenue instead of putting an extra burden on the taxpayers.
The government has been through this before but this does not mean that it is not under significant pressure for this sixth review. This is a time of vulnerability for the country, where the government has proposed several economic decisions which may not align much with the IMF ideology. Pakistan faces a host of economic problems currently that the government has promised to find solutions for. These include a large circular debt, and lowering gas tariffs. The government has also promised to pass legislation granting more autonomy to the State Bank of Pakistan to issue fiscal policy. This also happens as the Pakistani rupee devalued to the year’s lowest, with the government under pressure now to cover the increased deficit in the current account.
However, a lot of the decisions the government plans to take to deal with these issues may not sit well with IMF executives, who stress revenue collection from the taxpayers and devaluation of currency rather than government spending programmes. The government will have to balance IMF demands to further jack up the base price of the electricity tariff, petroleum levies and income taxes, while it also caters to the consumers who are already suffering from inflation.
The government will have to emphasise our record revenue collection this year and our emphasis on curtailing tax loopholes, while at the same time building the case for restructuring the tax system and not imposing any additional taxes.
Source: Published in The Nation