The International Monetary Fund (IMF) has demanded cash-strapped Pakistan to boost its revenue generation by imposing further taxes in order to secure the ninth trance of the $7 billion loan programme stalled since September last. It emerged after a round of technical talks between the Pakistani authorities and the IMF delegation, which is visiting Pakistan for ninth review under the Extended Fund Facility (EFF), concluded on Friday.

The South Asian country is reeling from economic instability due to sharp decline of foreign exchange reserves, which are barely enough to cover less than one-month import. Fresh statistics showed the reserves held by the State Bank of Pakistan (SBP) dropped to a precariously low level of $3.09 billion 09bn in the week ending Jan 27 owing to external debt repayments.

Reserves held by commercial banks stood at $5.65bn, taking the country’s total liquid reserves to $8.74bn, the central bank said. Amid gloomy economic situation, the government is scrambling to revive the IMF’s loan programme. It has also expressed commitment to meet the conditions of the global lender. The recent nosedive in value of the local currency against the dollar is an outcome of the implementation of the IMF condition regarding removal of cap on the currency exchange rate.

Sources said the IMF had asked Pakistan to impose new taxes worth Rs500 billion to overcome circular debt and consequence of slow privatization procession. It would be impossible to meet the expense if new taxes were not imposed, the IMF delegation told the Pakistani authorities. It has also demanded immediate hike in levy on diesel to achieve the tax collection target.

Sources said a final decision about imposition of sales tax on petroleum products would be taken in the policy-level talks between the both sides. The finance official will later present the demands of the global lender to Prime Minster Shehbaz Sharif for approval.

On Friday, PM Shehbaz, in his address to the apex committee in Peshawar, revealed that the IMF was giving tough time to Finance Minister Ishaq Dar and his team as its conditions are beyond the imagination. Saying Pakistan was facing tough economic challenges, he said there was no other option except implementing the conditions of the IMF to revive the loan programme.

Credit : Independent News Pakistan-INP