KARACHI: Pakistan needs to “place the burden” on wealthy segments of society and ensure that the rich pay taxes and the poor are protected, an IMF spokeswoman said in a press briefing on Thursday.
The International Monetary Fund and Pakistan struck a staff-level agreement for the provision on $3 billion in bailout funds under a stand-by arrangement (SBA) earlier this year, giving the South Asian economy a much-awaited respite as it teetered on the brink of default.
Reforms linked to the bailout, including an easing of import restrictions and a demand that subsidies be removed, have already fueled annual inflation, which rose to a record 38.0 percent in May. Interest rates have also risen, and the rupee hit all-time lows. Last month the currency fell 6.2 percent though it has sharply recovered in September amid a crackdown on illegal foreign exchange trade in grey and black markets by security agencies.
The August data from Pakistan’s statistics bureau showed a slight easing from July’s 28.3 percent inflation rate, but food inflation remained elevated at 38.5 percent.
“Place the burden on the wealthy segments of society. It’s important … that the rich pay their taxes, tax to GDP ratio in Pakistan is very, very low and that the poor are protected in society. The poor and the vulnerable members of society are protected,” IMF spokeswoman Julie Kozack told reporters in Washington, when asked about IMF reforms linked to the bailout.
She said the objectives of the program were to “provide a policy anchor” to Pakistan to address domestic and external imbalances and a framework for financial support from other donors, multilateral and bilateral partners, including fresh financing and rollovers of debt coming due.
“Policy efforts center on the implementation of the fiscal year 2024 budget, appropriate monetary policy aimed at bringing inflation down, and continued reforms to improve the viability of the energy sector,” Kozack said.
“All of these reforms are ultimately aimed at paving the way for higher, more inclusive and more resilient growth. To support social development and climate resilience, the program envisages plans to strengthen public financial management, tax administration efforts, and to better prioritize public investment. And all of this is being done with support from partners including not only the IMF but also the World Bank and the Asian Development Bank.”