Dar consults Alvi on Taxation for IMF deal

-President tells Finance Minister to approach Parliament for higher taxation instead of promulgating Ordinance
-Lauds govt’s efforts amid negotiations with global lender
-Govt to impose Taxes via Mini-Budget to revive IMF deal

Staff Report

ISLAMABAD: President Dr Arif Alvi on Tuesday advised Finance Minister Ishaq Dar to approach parliament regarding the government’s plan to raise additional revenue through taxes instead of promulgating an ordinance.
Pakistan is battling an economic crisis which has seen inflation rocket up and forex reserves dwindle to critical levels. Last week, the central bank said its reserves had dropped to $2.9 billion, enough to cover less than three weeks of imports.
The country desperately needs the International Monetary Fund (IMF) to finalise the ninth review of the loan programme it entered with the global lender in 2019, paving the way for the release of a $1.2 billion tranche that will also unlock inflows from other bilateral and multilateral sources.
But an agreement with the IMF has been pending since October last year as the two sides have not been able to reach a consensus in talks that have largely centred around an economic reforms agenda focusing on the energy sector and exchange rate liberalisation.
Last week, an IMF delegation held talks with Pakistani officials for 10 days in Islamabad and left without a deal, saying virtual talks would continue.
Following the delegation’s departure, Dar said the government had ceded to all IMF conditions and would be implementing reforms immediately, including new taxes worth Rs170 billion and hiking gas tariffs, among other things.
According to a press release issued by the President’s Secretariat today, Dar met Alvi and apprised him about the progress in the talks with the IMF.
“The minister informed that the government wanted to raise additional revenue through taxes by promulgating an ordinance. The president advised that it would be more appropriate to take the parliament into confidence on this important subject and that a session be called immediately so that the bill is enacted without delay,” the press release said.
Further, President Alvi appreciated the government’s efforts in negotiating an agreement with the Fund and assured that the state would stand by the commitments made with the IMF. Meanwhile, PTI Vice President Fawad Chaudhry said no new taxes could be levied without the parliament’s approval. The talks in Islamabad focused on the ninth review of an IMF Extended Fund Facility (EFF) arrangement with Pakistan.

The IMF appreciated Prime Minister Shehbaz Sharif’s commitment to implement policies needed to safeguard macroeconomic stability and described the discussions as constructive.

The IMF also acknowledged they made “considerable progress … on policy measures to address domestic and external imbalances”. The Fund highlighted the key priorities discussed in Islamabad, which included increasing revenue, reducing untargeted subsidies, and scaling up social protection programmes.

Diplomatic observers in Washington say the IMF wants Pakistan to start implementing the suggested measures. The sources also highlight that the IMF statement issued after the Islamabad talks underlined this issue.

“The timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development,” the IMF said.