WASHINGTON - The International Monetary Fund (IMF) is on the brink of finalizing an agreement with Pakistan for the disbursement of a critical $710 million loan tranche, part of a larger $3 billion Standby Arrangement aimed at bolstering the South Asian nation's economy. IMF Managing Director Kristalina Georgieva disclosed the impending deal during a Bloomberg TV interview.
The discussions between the IMF and Pakistan began on November 2, 2023, and have been rigorous, involving comprehensive reports on cyber-related crimes and potential revenue presented by Pakistan's State Bank and Federal Board of Revenue (FBR). The talks also included technical discussions on anti-money laundering measures, policies against dubious transactions, and tax crimes.
Georgieva lauded Pakistan's commitment to reform amidst challenging circumstances. She underscored the importance of improving tax collection to prevent sovereign debt default, suggesting that a tax-to-GDP ratio of 15% would be instrumental in ensuring economic sustainability. To this end, the IMF has recommended stricter real estate taxes and additional levies on retail and agricultural sectors.
Should Pakistan face a tax revenue shortfall, retailers may be subject to a fixed tax, while agricultural taxation will require provincial consultation. The FBR has briefed the IMF on its Tax Policy and Management Task Force operations and the implementation of a Track and Trace system for monitoring taxable goods.
A successful review could see Pakistan receiving a $450 million tranche, supplementing the $1.2 billion first tranche already disbursed. This would bring the total received under the current program to $1.65 billion, with the second tranche expected to be sanctioned by the IMF's Executive Board in early December.
During her interview, Georgieva painted a stark picture of the global economy facing headwinds from high interest rates, pandemic recovery challenges, and conflicts such as the Israel-Hamas war. These issues have not only impacted local economies but also have broader implications for global inflation — now forecasted by the IMF to reach nearly 6% next year.
Georgieva emphasized the need for central banks to maintain strict policies until price pressures significantly ease, highlighting that reducing global uncertainty is crucial for a healthier world economy.
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