The International Monetary Fund (IMF) has called on the government of Pakistan to take significant steps towards fiscal reform by imposing Rs1,300 billion in taxes and ending tax exemptions.
IMF experts are recommending an increase in the general sales tax to at least 18% on a range of commodities, including essential food items, medicine, and petroleum products. This move is projected to contribute up to 1.3% of the GDP through additional tax revenue.
The Fund’s team, which last visited Pakistan in December 2023, emphasized the necessity of ending all tax exemptions to bolster revenue collection. The discussions with the caretaker government were held during their visit, but the new administration, currently taking charge, is expected to face significant challenges in implementing these measures.
Pakistan is awaiting the disbursement of the third installment of the stand-by agreement reached in July last year. However, the country is grappling with historically high inflation and interest rates. The proposed additional taxation, while aimed at improving fiscal stability, may further burden the population.
The IMF’s recommendations come amidst ongoing economic challenges for Pakistan, and the government will need to carefully weigh the impact of these measures on its citizens while striving for fiscal sustainability. Stay tuned for further updates on this developing story.
