Pakistan and the International Monetary Fund (IMF) successfully concluded the first review talks on Friday, paving the way for a staff-level agreement and the anticipated release of $2.2 billion under the Extended Fund Facility (EFF) and the augmentation of climate finance.
The two-week-long negotiations between Pakistan and the IMF resulted in a broader agreement on a revised framework for macroeconomic and fiscal adjustments for the current fiscal year.
Key macroeconomic projections, including GDP growth, CPI-based inflation and the current account deficit, were revised.
It is, perhaps, for the first time that the review has concluded to the satisfaction of people, who are the ultimate sufferers or beneficiaries of its outcome, which shows the authorities concerned, especially the economic team of the government led by Finance Minister Muhammad Aurangzeb, did its homework well and presented its case convincingly before the review mission.
There has been significant increase in revenue collection but despite that there were apprehensions of a mini budget as the targets were not fully met because of the ground realities.
However, instead of pressuring the country to go for more taxation, the IMF has apparently agreed to the downward revision of some targets and projections, obviating the need to impose additional taxes during the remaining three months of the current financial year.
According to reports, it has been decided during the talks to abandon the Tajir Dost Scheme (TDS), which was aimed at bringing the trading community into the tax net.
Traders have been resisting efforts aimed at documentation of the economy and rejected outright all attempts to make them pay even nominal tax.
Scrapping of the scheme, for whatever reason and (lame) excuse, will send extremely negative signals to existing and honest tax-payers and raises questions about the ability of the government to move effectively towards the stated objective of bringing all sectors in the tax net.
The government will have no moral justification to raise more money from those who are already paying more than their due share of taxes.
