IMF Chief Hints At A Different Tax Target For Pakistan

In an interview says they are 'close' to an agreement of the review to come 'any day now'

IMF Chief Hints At A Different Tax Target For Pakistan

Despite Caretaker Finance Minister Shamshad Akhtar asserting that Pakistan's tax target have not been revised in their technical talks with the International Monetary Fund (IMF) team this week as part of the ongoing review of the $3 billion Stand-By Agreement (SBA), the fund says differently while indicating that they were very close to an agreement.

In an interview with the American publication [Bloomberg] in Singapore on Wednesday, IMF Managing Director Kristalina Georgieva was asked about the issues stalling the agreement.

"Parental issue is tax collection," Georgieva said, explaining that Pakistan's current tax to gross domestic production ratio stood at 12%.

"We (the IMF) are saying it has to be at least 15%," she said, adding that it was necessary to have tax collection at this level "to have the revenues to sustain the functioning of your economy."

"Please, for the people in Pakistan that can pay taxes. Collect from them."

Pakistan had set a tax collection target of Rs9.45 trillion. 

However, given the IMF chief's statement of achieving 15% tax collection, it would mean that Pakistan would need to collect another Rs2.4 trillion in taxes to put the overall tax collection target at Rs11.87 trillion. For this, the key sectors that the government is looking at are wholesale, retail and real estate, and government plans to tax these sectors more effectively and efficiently were key among discussions during the review.

Asked about how close they were to an agreement on the next tranche of the nine-month emergency agreement, the IMF chief said that they were "close".

"We expect an agreement of the review to come within this week. So any day now."

Georgieva was all praises for the caretaker setup and its efforts to manage Pakistan's economy.

"I can say that the Pakistani authorities, the Minister of finance, they deserve credit for this in a very difficult time speaking to the programme that they had," she said.

Meanwhile, Pakistan and the IMF have mutually agreed not to escalate the interest rate further during their negotiations as they look to stabilise the economic landscape.

In recent days, there has been an expectation in the market that the policy rate could, infact, be eased from its high point of 23%.