Pakistan’s elite in trouble amid bankruptcy as IMF tells Shehbaz Sharif govt to tax only the rich
Pakistan last week increased prices of commodities that are now weighing on people of the cash-strapped country. Concerned about poor in the bankrupt South Asian nation, IMF said that the Shehbaz Sharif government to tax its high earners and ensure that only poor get the subsidies.
‘Pakistan’s debt needs to be restructured’
Speaking at the sidelines of the Munich Security Conference, International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva told German broadcaster Deutsche Welle: “My heart goes to the people of Pakistan. They have been devastated by the floods that affected one-third of the population of the country.”
“What we are asking for are steps Pakistan needs to take to be able to function as a country and not to get into a dangerous place where its debt needs to be restructured,” Georgieva said.
IMF’s two-point solution for Pakistan
Georgieva said for Pakistan, IMF has been emphasising on two things:
1 – Tax revenues
2 – Fair distribution of subsidies
“Number one, tax revenues. Those who can, those that are making good money [in the] public or private sector need to contribute to the economy. Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need it,” she said.
Georgieva further said that it should not be the wealthy reaping benefits from subsidies. “It should be the poor [who] benefit from them,” she added.
The IMF chief said the global lender has made “very clear” that it wanted the poor people of Pakistan to be protected.
Pakistan that has been looming fears of default, last week imposed new PKR 115 billion taxation measures in a bid for a massive bailout.
From 15 February, the standard rate of General Sales Tax (GST) in Pakistan was increased from 17 per cent to 18 per cent in Pakistan.
Annual inflation of the country hit a new record high of 38.42 per cent.
Price of milk and chicken have also skyrocketed in Pakistan. A litre of loose (unpacked) milk is now being sold at PKR 210 from PKR 190 earlier, while a kilogram of chicken meat is now being fetched at PKR 700-780 from PKR 620-650 per kg last week.
Georgieva’s statement came days after IMF and Pakistan could not reach and a visiting Fund delegation departed Islamabad earlier this week after 10 days of talks. IMF has, however, said the negotiations would continue.
Talks between IMF and Pakistan centers around reaching an agreement on a reforms agenda under the country’s $6.5 billion bailout programme, which it entered in 2019. An agreement on the ninth review of the programme would release over $1.1bn.
Foreign exchange reserves in Pakistan have fallen to around $3 billion, with the country barely having enough to cover three weeks of controlled imports.
