The Pakistan government will be implementing a set of seven new conditions directed by the International Monetary Fund (IMF) under $6 billion loan program as the IMF analysts are doubtful about the country’s capacity to acquire the growth rate target, according to a recent report issued by the IMF this week.
Conditions of IMF:
Some of the conditions as stipulated by the IMF are given below:
- personal income tax (PIT) reforms
- electricity rate hike
- cut in the slab for lifeline consumers
- phasing out of refinance schemes
- recapitalization of two private banks
Pakistan expects to generate around 0.3 percent of GDP in revenue gains in fiscal 2023-24 through personal income tax reforms which involves reducing the tax slabs. Under energy subsidy reforms, government will lower threshold for protected consumer slab to 200 units from 300 units.
The conditions are to be implemented before April this year when the upcoming performance review is expected, as per the report released by the IMF, along with $1 billion tranche of the revived $6 billion program.
“There was no surprise on the conditions among the government quarters in Islamabad. It means these conditions were initially existing and government had requested to implement them in later stages,” said Dr. Vaqar Ahmed, joint executive director at the Islamabad-based Sustainable Development Policy Institute (SDPI) while talking to an international news agency.
He further added, “It was not possible for the government to enforce all the conditions at once, so they have sought time to implement in a phased manner.”
According to economists, the new actions will most likely burden those who are already paying taxes, but government representatives are claiming that the new taxes would target the ones out of the tax net.
The IMF has also asked the authorities to “unwind” lending to the housing and construction sector, saying: “Banks’ housing lending targets could present risks to financial stability and entail a misallocation of credit.”
The IMF report also points to a change of the Pakistani finance minister and presentation of the budget for the current fiscal year by the new finance chief, Shaukat Tarin.