22 Jul 2019
Pakistan must mobilise domestic tax revenue to fund social and development projects, while decreasing debt.
This is according to the acting director of the International Monetary Fund following a meeting with Pakistani PM, Imran Khan.
In a statement David Lipton said he and Khan discussed the implementation of Pakistan’s economic reforms that are supported by the IMF, aimed at stabilising the economy and resulting in sustainable and balanced growth.
Earlier this month the IMF approved a $6bn bailout package to help “return sustainable growth” to Pakistan’s economy, reports The Diplomat.
Over the 39-month deal, the IMF will monitor Pakistan’s progress every quarter. Within the agreement, $1bn has been released to the country.
Imran Khan’s government has faced ongoing pressure as stringent austerity measures and rising prices under the country’s latest IMF bailout are weighing on the middle class, Reuters reports.
Lipton stated that the IMF and other global partners were working closely with Pakistan’s government to help with the introduction of the reforms.
In a post-meeting statement Lipton commented: “I highlighted the need to mobilize domestic tax revenue now and on into the future to provide reliably for needed social and development spending, while placing debt on a firm downward trend.”
Khan is scheduled to meet with U.S. President Trump on Monday, who will likely urge Khan for help on bringing an end to the war in Afghanistan.
In 2018 Trump stopped millions of dollars in security aid to Pakistan, stating Islamabad was offering “nothing but lies and deceit” and giving terrorists a safe haven, a claim vehemently denied by Islamabad.
Over the past few years import-fuelled consumption has bolstered growth in Pakistan and helped mask the country’s economic problems and lack of a robust export base.
However, Imran Khan’s government turned to the IMF in order to avoid a balance of payments catastrophe.
According to IMF predictions, although economic growth reached 5.5% in the fiscal year to June 2018, it is forecast to decelerate to 2.4% this financial year.
Economist and political scientist Farrukh Saleem stated: “The IMF package is a straitjacket for Pakistan’s economy. The IMF document illustrates a very simplistic thought process.
“They say the budget deficit is extremely high, the solution is to increase the revenue by 45%. How exactly? It’s a shrinking economy. Similarly, they say the trade deficit is extremely high, and then devalue the rupee. The IMF isn’t trying to solve Pakistan’s problems at all, the package has zero reforms – be it power, budget deficit, or trade deficit. After all, the IMF is not a purely economic institute, it’s a political institute as well,” Saleem added.
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