In particular, the Executive Board of the International Monetary Fund called for the continued and sustainable implementation of Pakistan’s $7 billion bailout package approved for 37 months under an Extended Fund Facility. The IMF released $1 billion in this tranche to Pakistan as it took a critical step in the country’s ongoing efforts to stabilize its economy.
The IMF will be focusing on Pakistan’s requirement for sustainable reforms that are specific to the issues of widening a country’s chronically low tax base, which remains the central point of Pakistan’s economic recuperation. In exchange for the bailout, the government accepted unpopular reforms through expanding the tax net and addressing the extreme challenges in the energy sector.
Prime Minister Shehbaz Sharif
Had earlier framed the deal, sealed in July, as the “last” IMF program for the country. This loan is the result of long-drawn negotiations with officials at the fund and deals reached on far-reaching reforms needed for jolting the energy sector out of a crisis, including increasing household utility charges and cleaning up the tax collection process.
The statement said the continued implementation of the program is essential. The authorities need to collaborate with their international partners to secure additional financing as well as restore market access. APP adds: IMF directors welcomed steps taken toward a more equitable tax system and encouraged further efforts to broaden the tax base and improve tax administration.
Only a week ago, PM Shehbaz
Had approved drastic measures to enforce tax compliance, which include the banning of all types of banking and financial transactions for those who are non-filers of tax returns. This extreme measure falls in the broader efforts of the government to yield revenue.
This should be underpinned by sound policies and reforms that reinforce macroeconomic stability, address structural issues, and sustain inclusive and robust growth. To achieve the objectives of the program, ongoing financial support from development and bilateral partners will be important.
Pakistan has also obtained rollovers
Of bilateral loans worth $12 billion and financial commitments from key allies, including China, Saudi Arabia, and the UAE. Such commitments are critical for Pakistan to recover under the program.
It commended the country’s progress including rebound growth at 2.4% for FY24, taking inflation to single digit numbers, and improving reserve buffers even while flagging out the remaining vulnerabilities. Sustained structural challenges remain formidable. Pakistan is grappling with some great structural challenges. There exists a rather difficult business environment, weak governance, and investment refuses to defy a desperate need in areas like health, education, and infrastructure-which will cap further development.
Unless serious and long-lasting reform efforts are sustained, Pakistan risks falling further behind its peers, the IMF has warned. The govt needs to deal with those deeper issues for long-term fiscal sustainability and sustainable economic growth at a time when rising poverty, climate vulnerability, and underinvestment in the social sectors are all adding to the country’s woes.