Developments of last few days suggest that both Pakistan and the International Monetary Fund (IMF) are close to concluding the long delayed 9th review under extended fund facility. Winding up discussion on the budget 2023-24 in the National Assembly on Saturday, Finance Minister Ishaq Dar divulged that Pakistan has agreed to raise Rs 215 billion in new taxes and reduce current expenditures by Rs 85 billion after three days of parleys with officials of international lender.
Given current position of our foreign exchange reserves that are hardly enough to meet imports of one month, the release of next tranche of $1.1 billion from the IMF is very important to address immediate fiscal challenges and secure short-term economic stability. The inflow from the IMF will help unlock funding from other financial institutions such as World Bank and Asian Development Bank. This will really shore up our foreign exchange reserves, which will not only help us to timely meet external liabilities but also keep our industries in a functioning position that are dependent on imported raw materials.
It is not clear as to how additional taxes agreed with the IMF will be generated. While Finance Minister has assured that these measures will not burden poor people yet it is equally important that honest taxpayers are also not overburdened. As a result of understanding reached with the IMF, the annual FBR tax collection target has now been enhanced from Rs 9200 billion to Rs 9415 billion. We believe potential of tax collection is much higher if we bring all potential sectors into the tax net. The government will have to take difficult decisions in this regard. There is tax evasion of hundreds of billions of rupees in sectors such as real estate, retail and many others reference of which was also made by Defence Minister Khawaja Asif during his speech in the National Assembly the other day. A concerted effort is required to improve tax compliance, streamline public expenditures and promote private sector development. Fostering a business friendly environment and attracting foreign direct investment should be high on the agenda. The economic revival plan recently unveiled by the government is the only way forward, which needs to be pursued vigorously to come out of this vicious cycle of debt trap and achieve economic self-reliance.
