Pakistan and the International Monetary Fund (IMF) are advancing towards a crucial agreement on a new bailout package, anticipated to be finalized this month.
Pakistan is all set to hold a staff-level agreement on an International Monetary Fund bailout of more than $6 billion this month after addressing all the lender’s requirements in its annual budget, Minister of State for Finance, Revenue and Power Ali Pervaiz Malik said on Wednesday.
The Pakistan Muslim League-Nawaz (PML-N)-led coalition government has set challenging revenue and taxes targets in the annual budget of 2024 to secure approval from the IMF for a loan.
In the budget, the government has increased the taxes on the already burdened salaried class, bought exporters into the normal tax regime, increased the petroleum levy to Rs70, and imposed new taxes on the real estate sectors, among others, to increase tax collection.
The government has projected a tax revenue target of 13 trillion rupees ($47 billion) for the fiscal year starting July 1, marking a near-40% increase from the previous year. Additionally, the fiscal deficit is expected to shrink to 5.9% of GDP from 7.4%.
“We hope to culminate this (IMF) process in the next three to four weeks,” Minister of State for Finance, Revenue and Power Malik told Reuters, with the aim of thrashing out a staff-level agreement before the IMF board recess.
“I think it will be north of $6 billion,” he said of the size of the package, though he added at this point the IMF’s validation was the primary focus.
The IMF did not respond immediately to a request for comment.
Earlier on Sunday, Finance Minister Muhammad Aurangzeb expressed optimism about the country’s chances of securing a new IMF bailout, following President of Pakistan Asif Ali Zardari’s approval of the tax-intensive budget for the upcoming fiscal year starting July 1.
“The IMF programme is our assurance in terms of macro stability. We are taking it forward; it is inevitable. I’m very optimistic that we’ll be able to take it through the finish line for an Extended Fund Programme which is going to be larger and longer in nature,” the minister said addressing a press conference in Islamabad.
