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Print Print 2024-07-08

Taxes: Aurangzeb for breaking IMF bailout cycle

  • It's about time we get real, ball is in our court to provide bankable and investable projects, says finance minister on attracting foreign investment
Published July 8, 2024

ISLAMABAD: Pakistan will keep seeking financial assistance packages from the International Monetary Fund (IMF) if it does not significantly boost its tax revenue, Finance Minister Muhammad Aurangzeb said.

Aurangzeb’s comments come days after Pakistan’s president signed the federal budget for the current fiscal year, which has been criticised by the opposition, trade bodies and even the government’s allies for its ambitious tax targets.

The tax-heavy budget aims to raise Rs13 trillion ($46.6 billion) by July 2025, a roughly 40 percent increase from the current financial year. Financial experts say the budget is aimed at satisfying the IMF, which has repeatedly asked Islamabad to bring tax reforms to ensure growth in its fragile economy.

Prior actions for IMF programme largely complete, says Aurangzeb

Speaking to a British newspaper, Financial Times, Aurangzeb said he was “relatively confident” of reaching a staff-level agreement with the IMF this month for a loan his government has estimated to be between $6 and $8bn.

“But it will not be our last fund program if we don’t bring our tax revenues up.”

Pakistan hopes the IMF bailout package will stabilise its economy, one of the worst-performing ones in Asia that has been troubled by double-digit inflation, slow growth and low foreign reserves.

Pakistan’s economic indicators have recorded an improvement over the past few months, with inflation dropping down to 12.6 percent in June from the record-breaking 38 percent in May 2023. Pakistan’s stock market has registered high growth in recent weeks while the central bank’s foreign reserves have risen to over $9 billion.

“The direction of travel is positive, and investors are showing confidence in the stock market,” Aurangzeb said.

However, he acknowledged Pakistan’s tax collection authority, the Federal Bureau of Revenue (FBR), was viewed negatively by the masses.

“People don’t want to deal with the tax authority because of corruption, because of harassment, because of people asking for speed money, facilitation money,” Aurangzeb noted. “That’s not sustainable.”

The finance minister lamented how Pakistan’s economy was reliant on imports, stating that Islamabad had to borrow to pay off existing or accumulating debt.

“We need to create the capacity to repay loans,” Aurangzeb said. “As long as this economy stays import-based, what happens is the moment it heats up? We run out of dollars (and) we have to go back to the lender of last resort on our knees.”

Since April, Prime Minister Shehbaz Sharif has visited Saudi Arabia, UAE and China to attract foreign investment in Pakistan’s key sectors. His government has repeatedly assured Pakistan’s allies it seeks not loans but “mutually beneficial” partnerships.

“It’s about time we get real,” Aurangzeb said, pointing to Gulf investors’ demands for equity and board seats.

“The ball is in our court to provide bankable and investable projects.”

Comments

Comments are closed.

Arsalan Jul 08, 2024 07:02am
Under the excuse of breaking the imf bailout cycle they are breaking the working class of this country. Shameful govts, shameful times
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Usman Jul 08, 2024 08:49am
Start taxing properties at its present valuation and eliminate pensions.privatise even profiable department of govt.not proftable after paying pensions
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Maqbool Jul 08, 2024 09:11am
Good thoughts but now to implement your policy in real terms
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Aamir Jul 08, 2024 09:11am
Why don't we cut useless govt expenditures and reduce govt footprint instead of draconian taxes? Why don't we rationalize defense budget? Privatize all SOEs?
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Notsurprised Jul 08, 2024 09:34am
Hypocrite or just lame duck? Not sure yet. We just know you spared the sacred cows and taxed milk! What happened to lofty speeches on widening net? Nothing. Miftah was 100x better but PMLN failing
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Mumtaz Malik Jul 08, 2024 09:54am
The last paragraph commendably notes that the government prefers enhancing mutually beneficial partnerships over acquiring more loans.
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Mumtaz Malik Jul 08, 2024 09:54am
It also advises the honorable Premier of Pakistan that all establishment members, bureaucrats, and parliamentarians should embrace frugality.
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Mumtaz Malik Jul 08, 2024 09:55am
Pakistan will not achieve true prosperity until a welfare-oriented Islamic system is implemented.
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KU Jul 08, 2024 10:01am
IMF loans are keeping us afloat, but govt royal expenses are paid by people. Time is not on our side as we lose opportunity to ensure food security, water conservation, welfare, etc., crises is here.
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Irfan Jul 08, 2024 11:15am
Taxes vs Export Policy. Looks like CPEC is another IPP sort of agreement. The initial game changer plants turned out to be national burden. Pakistan was warned in FY15 about cpec economic troubles
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Arif Jul 08, 2024 11:57am
Unless Government control its expenses and privileges , even a 15% Tax to GDP ratio will not stop us from our quarterly visit to visit IMF .
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Wajid rehman Jul 08, 2024 12:26pm
Aslamoalikum sir abondand properties organization is not a useful department for government it is only loss of national asset's in my mind that sale out all the properties and save many billions of the national asset's.thanks.
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Yourname Jul 08, 2024 04:12pm
@Mumtaz Malik, I disagree, religion is one of the bigger means of oppression and division in this country, and most people are too scared or too indoctrined to question it,
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Kashif A Mandvia Jul 08, 2024 05:54pm
The perception that salaries individual bear a disproportioned share of the tax burden compared to non-filers can lead to frustrations. Government should reduce tax burden from salaries class.
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Cod Jul 08, 2024 11:56pm
@Yourname, you disagreeing won't change facts. Religion is or never was the problem. 75 years of Pakistan ruling was based on secularism which is why we are in this mess. Religion is not followed here
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Arsalan Jul 09, 2024 06:39am
@Irfan, Its not cpecs fault. when our own govt officials in order to make commissions like IPP's increase the fare/rate etc then y will the Chinese say no to it. Our own corrupt people r to blame
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