Hike in taxes ‘must to break IMF bailout cycle’

FinMin confident of reaching deal with global lender this month

Finance Minister Muhammad Aurangzeb has warned that the country would continue seeking financial assistance packages from the International Monetary Fund (IMF) if the government failed to significantly boost its tax revenues.

Speaking to a UK publication, the minister said he was “relatively confident” of reaching a staff-level agreement with the IMF this month for a loan the government had estimated to be between $6-$8 billion.

“But it will not be our last fund programme if we don’t bring our tax revenues up,” he added.

Aurangzeb’s comments came days after the president signed the federal budget for the current fiscal year—that has been criticised by the opposition, trade associations and even the government’s allies for its ambitious tax targets.

The government has set a tax revenue target of Rs13 trillion for the fiscal year that began on July 1, a nearly 40% jump from the prior year.

The budget for the ongoing fiscal has set a sharp drop in the country’s fiscal deficit to 5.9% of gross domestic product from 7.4% the previous year.

The government has set challenging revenue targets in its annual budget to help it win approval from the IMF for a loan to stave off another economic meltdown, even as domestic anger rises at the new taxation measures.

However, the Pakistan Stock Exchange (PSX) exhibited a bullish trend during the outgoing week as the KSE-100 index broke through the psychological barrier of 80,000 points, and the central bank’s foreign exchange reserves hit a two-year high at $9.4 billion.

“The direction of travel is positive, and investors are showing confidence in the stock market,” Aurangzeb said.