IMF
Economic review talks between Pakistan and the International Monetary Fund (IMF) are progressing, with technical-level discussions now completed for the release of the next $1 billion tranche.
The upcoming policy-level talks, set to begin on Monday, will be led by Finance Minister Muhammad Aurangzeb. These negotiations are critical for Pakistan’s economic stability, tax reforms, and governance improvements.
According to sources, the IMF delegation has engaged in multiple meetings with provincial representatives, tax authorities, and officials from the National Accountability Bureau (NAB). These discussions have focused on Pakistan’s economic performance, strategies to enhance tax collection, and governance measures aimed at improving transparency and accountability.
As part of provincial consultations, the IMF delegation met with Khyber Pakhtunkhwa’s finance secretary to assess the province’s economic performance. The discussions covered proposed legislation on agricultural income tax, with an emphasis on bringing it in line with corporate sector taxation.
Additionally, the province presented strategies to increase revenue collection over the next six months. Another key area of discussion was governance, with both parties deliberating on ways to enhance institutional efficiency at the provincial level.
Taxation and revenue reforms remain central to Pakistan’s engagement with the IMF. The chairman of the Federal Board of Revenue (FBR) briefed the IMF team on efforts to digitize tax collection systems and integrate data to minimize tax evasion. Discussions also included new anti-tax evasion laws, with the IMF expected to provide further recommendations during the next phase of negotiations.
Pakistan is considering easing the tax burden on salaried individuals in the upcoming budget while targeting the collection of Rs250 billion from various sectors, including retail. However, the IMF has rejected Pakistan’s proposal to eliminate GST on electricity bills and has instead urged the implementation of higher gas tariffs on captive power plants.
In an effort to manage circular debt, Pakistan has reached an agreement to borrow Rs1,250 billion from commercial banks at an interest rate of 10.8%. Meanwhile, the IMF has declined Pakistan’s request to extend the winter relief package for the industrial and agricultural sectors throughout the fiscal year, citing financial constraints.
Governance and accountability reforms were another focal point of the discussions. The IMF delegation held meetings with NAB officials to explore ways to enhance accountability mechanisms at both the federal and provincial levels. The IMF has emphasized the need to strengthen NAB and provincial anti-corruption institutions to promote transparency and curb illicit financial practices.
Discussions also addressed concerns about politically motivated investigations, with the IMF stressing the importance of a fair and impartial accountability framework. In response, the government assured the IMF that it would take concrete steps to ensure the accountability of public officials and combat illicit wealth accumulation.
To enhance financial transparency, Pakistan has committed to making the assets of senior government officials (grades 17-22) and their families publicly available by September. The State Bank, commercial banks, FBR, and the Financial Monitoring Unit (FMU) will collaborate to ensure effective financial oversight. Additionally, a digital portal for asset declaration, managed by the FBR, will be launched in September.
As part of its ongoing engagement, the IMF is set to release a Governance and Corruption Diagnostic Assessment Report in July. This report will outline key recommendations to reduce corruption, eliminate bureaucratic inefficiencies, and create a more business-friendly environment.
With policy-level talks set to commence on Monday, Pakistan remains focused on securing IMF support for its broader economic stabilization efforts. The government aims to implement reforms that will not only ensure fiscal sustainability but also enhance governance and transparency across various sectors.
