Economic Program
Amidst the visit of the International Monetary Fund (IMF) technical team to Pakistan, a series of crucial discussions and meetings are unfolding, marking the commencement of preparations for a policy document based on recommendations for a potential new program in the country.
The delegation, comprising representatives from the IMF, has not only engaged with key government officials but has also conducted visits to the Ministry of Finance and Ministry of Commerce, signaling a comprehensive review of the 2019 policy document in light of the current economic situation.
Sources indicate that the IMF team has been in dialogue with the task force tasked with formulating recommendations focused on reforms. The collaborative effort seeks to assess and address the economic landscape, potentially paving the way for policy adjustments and financial support.
In 2019, the IMF collaborated with Pakistan to formulate a policy paper for a loan program, encompassing elements such as federal excise duty and additional taxes on tobacco beverages. This initiative also proposed an increase in the personal income tax rate and the removal of GST exemptions. The ongoing visit aims to build upon these measures.
The Ministry of Finance has confirmed Pakistan’s previous engagement with the IMF in a loan program, emphasizing the importance of the current collaboration in reassessing economic strategies. The technical team’s consultations extend to supporting increased tax efficiency, aligning with the IMF’s target to raise the tax-to-GDP ratio to 15% and bringing more individuals, especially the affluent, into the tax net.
These consultations are also expected to delve into the mechanism to include retailers in the tax net, with the IMF providing policy guidelines for the proposed scheme. The overarching goal is to bring 1-1.5 million people into the tax net by June 2024 and increase the number of taxpayers to 6.5 million by that time, leveraging third-party data and technology for tax net expansion.
Anticipated amendments to the tax policy resulting from these negotiations are slated for implementation in the upcoming budget, as discussions persist on enhancing tax revenue, policy adjustments, and the development of a scheme for retailers. The collaborative efforts between the IMF and Pakistani authorities during this visit aim to navigate the economic challenges and lay the groundwork for a more resilient and sustainable financial future.
