The International Monetary Fund (IMF) has urged the Pakistani government to impose more taxes on the rich and protect the poor by providing subsidies if it wants to function as a state.
IMF Managing Director, Kristalina Georgieva, while speaking to a German broadcaster on the sidelines of the Munich Security Conference, IMF Managing Director, Kristalina Georgieva said: “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.”
Operate as functional nation
According to the broadcaster, Georgieva stated that the IMF had urged Pakistan to take measures to operate as a functional nation and avoid reaching a “dangerous point” where the country’s debt would require restructuring.
Highlighting the two points that the IMF emphasized vis-a-vis Pakistan, the IMF official said the fund has urged the government to:
- Generate tax revenue from, those who can, those that are making good money, the public sector, and the private sector, they need to contribute to the economy.
- Have a fairer distribution of the pressure by moving subsidies only toward the people who really need them. It should not be like the wealthy benefit from subsidies. It should be the poor who benefit from them.
IMF’s Pakistan visit
Earlier this month, the ninth review of the $6.5 billion bailout package between Pakistani officials and the IMF staff was completed without a staff-level agreement. Nonetheless, a series of actions were agreed upon by both parties that could still facilitate the conclusion of the deal.
During the 10-day visit by the IMF mission, Pakistani authorities’ aspirations of a gradual implementation of certain conditions were dispelled. Even so, Pakistan agreed to adopt the policy recommendations proposed by the IMF in the Memorandum of Economic and Financial Policies (MEFP) in hopes of securing a staff-level agreement soon. Notably, there was a consensus to let the market dictate the value of the rupee, remove import restrictions, and clear previously imported goods.
Inflation could reach 40%
Financial analysts in Pakistan have issued a warning of a potential rise in inflation of as much as 40% in the upcoming months following the revelation that weekly inflation in the country has reached 38.4% on a yearly basis, owing to a recent spike in fuel prices.
The Sensitive Price Indicator (SPI) recorded a 2.9% surge for the week ending on Thursday, Feb. 16, with the surge mainly affecting energy and food prices.
“In the coming months, the inflation rate is expected to increase by 35 to 40 percent due to the government’s decision to increase gas and electricity tariffs, hike in general sales tax, and the escalation in fuel prices,” according to Abdul Azeem, head of research at the Spectrum Securities.