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IMF advises Pakistan: According to The News on Monday, the International Monetary Fund (IMF) wants Pakistan to only grant subsidies to those who need them. It claims that resources should be transferred from the wealthy and affluent to the underprivileged.
The Fund’s managing director, Kristalina Georgieva, made the remarks on Sunday during an interview with a global broadcaster.
According to Georgieva, the international lender requests that Pakistan take action to maintain its ability to function as a nation and avoid falling into a dangerous situation that would need debt restructuring.
“My thoughts are with Pakistan’s people. One-third of the country’s population was hit by the floods, which have left them in ruins, according to the managing director.
“We place a strong emphasis on two things: first, increasing tax revenues because people who earn well in the public or private sectors must support the economy. The second goal is to distribute limited resources more by allocating subsidies solely to those who require them. The wealthy shouldn’t receive subsidies, it shouldn’t be that way. The impoverished ought to gain from them, she claimed.
“And the Fund is pretty evident there. We want Pakistan’s underprivileged citizens to be safeguarded.
The IMF could only assist Islamabad in overcoming its impending balance of payment (BoP) problem by guaranteeing that the nation continues to be able to fulfill its debt commitments without going into default, sources told The News in background discussions.
When the necessity comes, the Pakistani government will be required to request debt restructuring from Paris Club or non-Paris Club countries, according to the sources.
“Pakistan Focuses on IMF Programme Renewal for Debt Restructuring amid Large External Debt Payments”
The government is currently concentrating on the renewal of the IMF program because it is a necessary step before requesting any debt restructuring, according to the sources. They stated that debt restructuring, particularly from non-Paris Club nations, might be taken into consideration when the program reaches the appropriate stage to move towards the intended goals.
In the upcoming fiscal year, Pakistan would need to pay $27 billion in markup and principal to service its external debt. By June 30, 2023, the $6.5 billion IMF program under the Extended Fund Facility (EFF) will come to an end, and there is no chance for it to be extended longer.
As the current EFF program expires, Pakistan will need to apply for a new loan from the Washington-based lender, taking in mind the substantial external debt servicing requirements and the potential for lower foreign currency reserves.
But, the IMF assessment mission has made it clear that the government would need to collect taxes from everyone who earns money to fund the national coffers.
Out of more than 200 million people, only about 3.5 million file tax returns, so there is a need to expand the limited tax base.
“IMF-influenced mini-budget imposes taxes and cuts subsidies”
Following the IMF’s recommendations, the administration published the mini-budget, which imposed additional taxes totaling Rs170 billion, and the National Assembly was expected to approve it on Monday (today).
Second, the lender has emphasized the necessity of eliminating unintended subsidies and directing resources so that the underprivileged can make use of them.
“As a part of the IMF agreement, the government eliminated both the Kissan package and the electricity sector subsidies for export-oriented industries.”
The government asked the IMF to provide an adjustment on the Rs472 billion in flood-related expenses, and the IMF mission complied.
However, To shield the poorest of the poor from the anticipated inflationary pressures, which may reach 35 percentage points by June 2023 from the current CPI-based inflation rate of 27.6% for January 2023, the government has increased funding for the Benazir Income Support Programme (BISP) from Rs360 billion to Rs400 billion.