Pakistan’s Finance Minister, Muhammad Aurangzeb, has warned that if the nation does not escalate its tax revenues, it will inevitably have to seek more programs from the International Monetary Fund (IMF) in the future.
In a detailed conversation with the British newspaper, Financial Times, on Sunday, Mohammad Aurangzeb expressed the government’s ‘relatively confident’ stance on reaching a staff-level agreement with the IMF within this month. This agreement is anticipated to be within the range of $6 billion to $8 billion.
However, the finance minister emphasized that without a significant increase in tax revenue, this will likely not be the final bailout program for Pakistan.
The Pakistani government is optimistic that the IMF bailout package will stabilize the country’s faltering economy, currently grappling with double-digit inflation, sluggish growth, and dwindling foreign exchange reserves.
Encouragingly, Pakistan’s economic indicators have shown improvement in recent months. Inflation has decreased to 12.6 percent in June, down from a record high of 38 percent in May 2023.
Simultaneously, there have been positive signals from the stock market, and foreign exchange reserves with the Central Bank have surged to over nine billion dollars.
Commenting on this scenario, Mohammad Aurangzeb remarked that these factors reflect a positive trajectory for the economic journey, and investors are increasingly showing confidence in the stock market.
Nevertheless, he acknowledged a decline in public trust towards Pakistan’s tax authority, the Federal Board of Revenue (FBR).
He noted, ‘People are reluctant to engage with the tax authority due to issues of corruption, harassment, and demands for speed and facilitation money. This situation is untenable.’
The finance minister expressed regret over how heavily Pakistan’s economy depends on imports, necessitating further borrowing to pay off existing and older debts.
The finance minister said that we need to build debt repayment capacity. As long as this economy remains dependent on imports, we will also face a shortage of dollars and in such dire situations we have to go back to our knee-jerk lenders as a last resort.
The finance minister’s statement came days after the President of Pakistan signed the federal budget for the current fiscal year, which was criticized by the opposition, trade bodies and even coalition parties for its high tax targets.