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PESHAWAR: Prime Minister Shehbaz Sharif said Friday the government would have to agree to IMF bailout conditions that are “beyond imagination”, as it battles a spiralling economic crisis.

An International Monetary Fund (IMF) delegation landed in Pakistan on Tuesday for last-ditch talks to revive vital financial aid that has stalled for months.

The government has held out against tax rises and subsidy slashing demanded by the IMF, fearful of backlash ahead of elections due in October.

“I will not go into the details but will only say that our economic challenge is unimaginable. The conditions we will have to agree to with the IMF are beyond imagination. But we will have to agree with the conditions,” Sharif said in televised comments.

Govt team tries to persuade IMF to unlock lending

Pakistan’s economy is in dire straits, stricken by a balance of payments crisis as it attempts to service high levels of external debt, amid political chaos and deteriorating security.

Foreign exchange reserves dropped again this week to $3.1 billion, which analysts said would be enough to cover less than three weeks of imports, while the rupee is at a record low against the US dollar.

The world’s fifth-biggest population is no longer issuing letters of credit, except for essential food and medicines, causing a backlog of thousands of shipping containers at Karachi port stuffed with stock the country can no longer afford.

Data on Wednesday showed year-on-year inflation had risen to a 48-year high, leaving Pakistanis struggling to afford basic food items. “Poor people will not be able to survive,” said Samina Bhatti as she shopped at a market in Islamabad.

“Petrol is so expensive, what will they do, will they start travelling on foot? A daily wage earner can’t afford the rent on his home,” she said.

Years of financial mismanagement and political instability have damaged Pakistan’s economy, worsened by a global energy crisis and devastating floods that submerged a third of the country.

With the prospect of national bankruptcy looming, Islamabad in recent weeks began to bow to pressure prompting the IMF’s last-minute visit.

The government loosened controls on the rupee to rein in a rampant black market in US dollars, a step that caused the currency to plunge to a record low, and hiked petrol prices by 16 percent.

But the IMF wants further hikes to artificially cheap petrol, electricity and gas prices, designed to help low-income families, and the withdrawal of tax exemptions for the export sector and a boost to the pitifully low tax base.

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KhanRA Feb 04, 2023 12:44pm
It is the decades of unsustainable bad decisions that cause hardship - not the IMF. IMF only imposes conditions that were unsustainable to begin with, which lead to even more bad decisions. Like the petrol subsidy, which encourages car use and more petrol import. Pakistan neglected cheap transport on trains and metros and builds motorways instead. Or nationalized industries that have no incentive to improve - like electricity companies who don’t care about losses, or PIA which couldn’t care less about being functional or reliable.
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KhanRA Feb 04, 2023 12:45pm
Why is the Sharif clan so terrified of doing something so extremely basic - like broadening the tax base? This would help prevent these disasters in the first place. The elites don’t want to pay taxes, and the elite is who the PML and PPP serve.
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Awami Feb 06, 2023 08:31am
@KhanRA, Income tax paying number is less than 2% of total population. The farm sector is not paying tax at all. For fair taxing this is not fair.
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