- The IMF mission concludes its visit to Pakistan from November 12 to 15.
- He says he is encouraged by the authorities’ commitment to reforms.
- Next mission for the first review of the FEP expected in the first quarter of 2025.
ISLAMABAD: The International Monetary Fund (IMF) has urged Pakistan to broaden its tax base by targeting untapped sources of revenue, as the country grapples with challenges in increasing its tax collection.
The IMF statement comes as its mission – led by Nathan Porter – concluded a visit to Pakistan from November 12-15, during which they reviewed the country’s economic progress.
The IMF mission also met with senior officials of the federal and provincial governments and the State Bank of Pakistan, as well as representatives of the private sector, the Fund statement said.
The Fund said staff visits are a standard practice for countries conducting biannual program reviews and aim to engage with authorities and other stakeholders on country economic developments and policies as well as on the status of planned reforms.
As the visit was unplanned, some reports indicated that the global lender’s visit would mean the federal government would have to roll out a mini-budget; however, reports now suggest that such a move would not happen.
“We have had constructive discussions with the authorities on their economic policy and reform efforts aimed at reducing vulnerabilities and laying the foundation for stronger, sustainable growth,” Porter said in a statement at the end of the visit.
The official added that the visiting delegation and Pakistani authorities agreed on the need to pursue prudent fiscal and monetary policies and mobilize revenue from untapped tax bases, while transferring greater social and development to the provinces.
Furthermore, he added, structural reforms in the energy sector and constructive efforts are essential to restore the viability of the sector.
Porter further said that Pakistan should take steps to reduce state intervention in the economy and increase competition, which would help foster the development of a vibrant private sector.
“Careful implementation of the program can create a more prosperous and inclusive Pakistan, thereby improving the living standards of all Pakistanis.”
The IMF, for its part, said it was encouraged by the reaffirmed commitment of the Pakistani authorities to economic reforms supported by the Extended Financing Facility (EFF) for 2024.
The next mission associated with the first review of the FEP is expected in the first quarter of 2025.
“Competitive market in the energy sector”
Dr Khaqan Najeeb, former advisor to the Ministry of Finance, while commenting on the developments, said the IMF visit was an engagement to take stock of the first quarter quantitative results and the ongoing structural benchmarks for the reforms.
“The preliminary results highlight the work needed on the recurring issues of broadening the tax base in 3 areas (agricultural income tax, retail trade and real estate) plagued by significant tax gaps, and the need for decentralization of finances to the provinces, as planned under the agreement. with the 18th Amendment,” he said.
Dr Khaqan stressed that restructuring the energy sector, beyond price changes, remains essential, coupled with a reduced state footprint, something the country has struggled to do.
“The need for a competitive market for the energy sector has been an ongoing effort for years and has been highlighted once again by the IMF.
“The IMF commitment also highlights the importance of Pakistan’s fiscal consolidation and external reserves to maintain macroeconomic stability,” Khaqan said.
This commitment could help ensure that Pakistani authorities stay on course to achieve the targets of the first review in the first quarter of 2025, he added.