<\/p>\n
The government is set to present its first budget this week since its inauguration<\/a> in March, amid some \u201ctough\u201d conditions by the International Monetary Fund (IMF), which local economists reckon would result in \u201cheavy\u201d taxation and inflation.<\/p>\n The finance ministry and the IMF are locked in last-minute talks ahead of the budget<\/a> for the fiscal year 2024-25 as the federal government is in a fix over some \u201ctough\u201d demands by the loaning agency, a ministry official told Anadolu<\/em> wishing not to be named as he was not allowed to speak on the record.<\/p>\n The IMF\u2019s key demands, he said, include an increase in the tax revenue target, withdrawal of subsidies, taxes on the agriculture sector, increase in levy and taxes on power, gas and oil sectors, privatisation of sick government organisations and units and improving administration.<\/p>\n The country\u2019s tax target<\/a> in the last fiscal year was nearly Rs9.4 trillion, whereas the IMF reportedly wants to increase it up to Rs11tr for the upcoming fiscal year.<\/p>\n The tax revenue was reported at $25.99bn by March 2024, as tax authorities are confident they will meet the assigned target.<\/p>\n According to the Federal Board of Revenue, the overall revenue growth remained 31 per cent during the first 11 months of the current fiscal year compared to the same period last year.<\/p>\n \u201cThe government is already working on several reforms to put the economy on track. However, some of the [IMF] demands, mainly regarding tax revenue target, are very hard considering the current economic conditions,\u201d the official said.<\/p>\n \u201cWe are negotiating with the IMF officials on these terms, and hopefully we will be able to convince them,\u201d he maintained. The government, which received<\/a> $1.1bn, the last tranche of a $3bn IMF bailout package in May, is negotiating for a \u201clong and larger\u201d loan programme to the tune of $7 to $8bn.<\/p>\n In a related development, the State Bank reduced<\/a> the interest rate from 22pc to 20.5pc, a move that came a week after inflation slowed to a 30-month low of 11.8pc in May.<\/p>\n It was welcomed and termed \u201cpositive for the business environment\u201d by the business community.<\/p>\n The all-time high 22pc rate was fixed in June last year<\/a>.<\/p>\n State Minister for Finance Ali Pervez Malik did not respond to Anadolu\u2019s<\/em> request for comment on the IMF\u2019s reported demands.<\/p>\n Ashfaque Hasan Khan, an Islamabad-based economist, reckoned that the IMF demands have caught Pakistan between a \u201crock and a hard place\u201d.<\/p>\n \u201cSince Pakistan is seeking another loan programme from the IMF, it\u2019s difficult for it to reject the loaning agency\u2019s tough conditions,\u201d Ashfaque, who served as an economic adviser to the finance ministry from 1988 to 2009, told Anadolu<\/em>.<\/p>\n Commenting on the IMF\u2019s reported demand for a Rs1.6tr increase in the tax revenue target for the upcoming fiscal year, Ashfaque dubbed it as \u201chard to achieve given the current depressed economic environment\u201d.<\/p>\n \u201cAdding more burden to taxpayers, particularly the country\u2019s already weakening industry, means a rise in cost productions, which will ultimately encourage imports rather than exports,\u201d he warned.<\/p>\n Sharing a similar view, Khaqan Najeeb, an economist and former adviser to the finance ministry, said if authorities fail to convince the IMF of its main focus on increasing the country\u2019s tax-to-GDP ratio, then it will be a \u201cheavy taxation budget, as well as will delay [new] agreement with the IMF\u201d.<\/p>\n \u201cPakistani authorities feel [that] putting more burden on already taxed areas like manufacturing, personal income tax, sales tax may not be viable. So, hopefully, the authorities are able to convince the IMF of reliance on direct taxation proposals to avoid the incidence of taxation on the already taxed areas,\u201d he told Anadolu<\/em>.<\/p>\n The IMF\u2019s main focus is on an increase in the federal tax-to-GDP ratio from 10pc to 13pc in the coming years.<\/p>\n Najeeb further said that the government needs to broaden the existing tax base, remove tax concessions, increase the tax net, ensure compliance and improve administration in the next IMF extended fund facility, which is the \u201cright way\u201d forward.<\/p>\n \u201cWe should also try to bring the agriculture and retail sector into the tax net,\u201d he added.<\/p>\n\u2018Between rock and hard place\u2019<\/h2>\n
Total surrender to IMF will be \u2018disastrous\u2019<\/h2>\n