Pakistan's economic crisis deepens as IMF demands tax reforms and fairer subsidies

 Pakistan's economic crisis deepens as IMF demands tax reforms and fairer subsidies

Days after the two parties finished their 10 days of negotiations and ninth assessment of the USD 6.5 billion rescue plan, the IMF head made his remark.

 

Cash-strapped The International Monetary Fund (IMF) has cautioned Pakistan that if it wants to continue operating as a nation, it must act right away to make sure that its wealthy incomes pay taxes and that only the needy receive subsidies. In an interview with German state television Deutsche Welle on Friday, IMF director Kristalina Georgieva made the remarks and said that Pakistan needed to take significant action to prevent falling into a "dangerous zone" where its debt would need to be restructured.

She asserted that the IMF has made it plain that it wants Pakistan's poor to be safeguarded and that only the wealthiest should gain from subsidies. Georgieva stressed that Pakistan must boost tax revenues in order to run as a nation, as well as have a more equitable distribution of pressures by allocating subsidies solely to those who actually require them.

 This declaration was made during the ninth review of the USD 6.5 billion bailout package, which was finalized by both parties without a staff-level agreement after 10 days of negotiations. Nonetheless, all parties concurred on a number of steps that may yet be used to seal the deal. Around USD 1.1 billion would be made available if the ninth review of the program could be agreed upon.

The IMF is now in talks with Pakistan about restarting its lending program. Resuming the IMF program will also open up new finance options for Pakistan. The State Bank of Pakistan's foreign exchange reserves, which are barely enough to cover three weeks of restricted imports, have dropped to about USD 3 billion, leaving the nation in desperate need of money as it fights a searing economic crisis.

 To put the tax reforms into effect and come to an agreement with the IMF, the administration is working against the clock. Pakistan has until March 1 to follow all of the IMF's recommendations.