ISLAMABAD: Finance Minister Muhammad Aurangzeb on Sunday warned that Pakistan will continue to seek financial assistance from the International Monetary Fund (IMF) if it fails to increase tax revenue.
The finance minister said he was “relatively confident” he would reach a staff-level agreement with the global lender this month on an estimated $6 billion to $8 billion loan.
“But it won’t be our last fund program unless we increase our tax revenue,” the finance minister said in an interview with the Financial Times.
The federal government last month presented a tax-laden budget of Rs 18.877 trillion for fiscal year 2024-25 (FY25), aimed at boosting public revenue and satisfying the IMF, which has repeatedly called for better tax collection.
The budget aims to raise Rs13 trillion by next July, roughly a 40% increase over the current financial year, to reduce a crushing debt burden that has seen 57% of government revenue gobbled up by interest payments.
The tax hike will mostly affect salaried workers, who make up a relatively small part of Pakistan’s largely informal economy, as well as some retail and export businesses. The budget also threatened punitive measures for tax evaders, including restrictions on mobile phones, access to gas and electricity and the ability to fly abroad.
“We don’t have five years for our programme,” Aurangzeb warned in the wake of the budget, which seeks to revive the country’s ailing economy.
“The direction of travel is positive and investors are showing confidence in the stock market,” Aurangzeb said, referring to the KSE-100 index, which has been one of the best performers in Asia so far. Still, the government faces a significant challenge to get Pakistan on a path to longer-term growth and debt sustainability, he said.
Pakistan’s debt has soared since the mid-2000s as authorities have failed to invest a flood of loans from international bondholders and countries including China and the Gulf states into productive, export-oriented sectors.
“As long as this economy remains import-based, the moment it heats up, ‘we’re going to run out of dollars [and] have to go back to the lender of last resort on our knees.’
Prime Minister Shehbaz Sharif recently traveled to Saudi Arabia, the United Arab Emirates and China to seek investment beyond the IMF program, which would be Pakistan’s 24th with the multilateral lender.
“It’s time we got down to reality,” the finance minister said, pointing to demands from Gulf investors for capital and board seats. “The ball is in our court to secure financeable and investable projects.”
He also damaged the reputation of corruption at the Federal Bureau of Revenue.
