Pakistan has not yet made any formal request to the IMF for re-negotiating conditions of the IMF programme or extending the time-frame beyond September 2022 under the $6 billion Extended Fund Facility (EFF).
The IMF’s Resident Chief in Pakistan, Teresa Daban Sanchez, stated this during a webinar organized by the Pakistan Institute of Development Economics here on Monday. The IMF programme, she said, was for three years period and there was plenty of room for implementing the required reforms. The reforms are required to be calibrated in the context of COVID-19 pandemic.
She said that Pakistan’s Direct Taxes are very low, so loopholes needed to be fixed. She was of the view that Pakistan could go back to its potential growth of 4 percent if imbalances are fixed to achieve the desired potential. She said that Pakistan’s power sector was facing a very challenging situation and the country needed to have strategy to tackle the monster of circular debt. “There is need to strike a balance as Pakistan’s possessed challenges needs to be fixed. Pakistan’s power sector is facing a challenging situation and the circular debt needs to be addressed. The same happens with tax reforms and those who can afford must contribute their shares into taxes.” The institutional strengthening should have been done before such as NEPRA, she said and added that it was in the interest of the sustainability of the country. She said that the COVID-19 posed challenges for everyone, including Pakistan. The fiscal strategy needs to be sustainable and credible and it must have room for increased spending on social sector, she added. The tax reforms must protect common man and women as the collection of direct taxes is low and needs to overcome loopholes. The exemptions need to be abolished, she maintained.
She said that the power tariff is way of adjusting the cost and there are many ways to protect the vulnerable. There are many examples whereby institutional strengthening can play a pivotal role for achieving sustainable and inclusive growth. She said that there was a need to reduce political influence on institutions. The growth is a complex phenomena but inclusive and durable growth is possible with promotion of investment. The investment to GDP ratio stands at 10 percent in case of Pakistan but its on higher side in other parts of the globe. The independence of SBP can help achieve growth potential. The social spending needs to be increased as the social safety net programme in Pakistan is the largest in the world but it can be increased manifold, she added.
