Finance Minister Muhammad Aurangzeb has said that Pakistan’s upcoming IMF bailout will not be the last if the government fails to significantly boost tax revenue.
“We do not have five years for our programme,” Aurangzeb stated, emphasising the need for immediate action to deliver results in the next two to three months.
Muhammad Aurangzeb said he was “relatively confident” of reaching a staff-level agreement with the IMF this month on a loan, which his ministry has previously pegged at between $6 and $8bn. “But it will not be our last fund programme if we don’t bring our tax revenues up,” he told the Financial Times in an interview.
Pakistan narrowly avoided default last year with a $3 billion IMF emergency loan, which expired in April. In response, Aurangzeb announced a tax-heavy budget to raise public revenue and meet IMF conditions, targeting Rs13 trillion ($46.6 billion) by next July. This aims to reduce a debt burden consuming 57 percent of government revenue through interest payments.
The budget increases taxes primarily on salaried workers, a small segment of Pakistan’s largely informal economy, and some retail and export businesses. It also includes punitive measures for tax avoiders, such as restrictions on mobile phone, gas, and electricity access, and the ability to travel abroad.
The finance minister acknowledged recent economic improvements, including reduced inflation and increased central bank reserves, but stressed the need for longer-term growth and debt sustainability.
“The direction of travel is positive, and investors are showing confidence in the stock market,” said Aurangzeb, referring to the KSE100 index, which is one of Asia’s best-performing year to date. Still, the government faces a considerable challenge in putting Pakistan on the path for longer-term growth and debt sustainability, he said.
He also criticized corruption within the Federal Board of Revenue, citing it as a deterrent for dealing with the tax authority. He and the rest of Shehbaz Sharif’s cabinet have chosen to forgo government salaries and foreign citizenships in a show of commitment to fiscal reforms.
