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Pakistan will continue to seek IMF bailouts if it fails to boost tax revenue: Finance minister

The Pakistan Muslim League-Nawaz (PML-N) leader said that he was 'relatively confident' of reaching a staff-level agreement with the Washington-based global lender this month for an estimated loan of USD 6-8 billion.
Last Updated : 08 July 2024, 12:30 IST

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Islamabad: Pakistan Finance Minister Muhammad Aurangzeb has warned that the cash-strapped country will continue to seek IMF bailouts if it fails to boost tax revenue, according to a media report on Monday.

The Pakistan Muslim League-Nawaz (PML-N) leader in an interview with the the UK-based Financial Times newspaper said that he was "relatively confident" of reaching a staff-level agreement with the Washington-based global lender this month for an estimated loan of USD 6-8 billion.

Aurangzeb, however, said, “It will not be our last fund programme if we don’t bring our tax revenues up.” Last month, the federal government passed the tax-laden Rs 18,877 billion budget for the fiscal year 2024-25, amidst protests from the Opposition which labelled it as an International Monetary Fund-driven document that was harmful to the public.

Weeks after slashing the fuel prices ahead of the Eid ul Adha festival, the cash-strapped Pakistan government on July 1 sharply hiked their prices for the next fortnight as it began the new fiscal year.

The tax rises will mostly fall on salaried workers, who comprise a relatively small part of Pakistan’s mostly informal economy, as well as some retail and export businesses, Geo News reported.

The budget also threatened punitive measures for tax avoiders, including restrictions on mobile phones, gas and electricity access and the ability to fly abroad.

“We do not have five years for our programme,” Aurangzeb warned in the wake of a budget that seeks to reset the country’s ailing economy. “We have to start showing, start delivering, in the next two to three months,” he said.

The finance minister said the direction of travel is positive, and investors are showing confidence in the stock market, referring to the KSE-100 index.

Still, the government faces a considerable challenge in putting Pakistan on the path for longer-term growth and debt sustainability, he said.

The country’s debt has soared since the mid-2000s, as authorities failed to invest the money from loans into productive and export-oriented sectors, Geo News reported.

Instead, the country remains reliant on imports, forcing Islamabad to borrow to pay off existing and accumulating debts, Aurangzeb said.

“We need to create the capacity to repay loans,” the finance minister 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.” Prime Minister Shehbaz Sharif has travelled recently to Saudi Arabia, the United Arab Emirates and China to solicit investments on top of the IMF programme, which would be Pakistan’s 24th with the multilateral lender.

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Published 08 July 2024, 12:30 IST

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