Headline: IMF Denies Reports of Tax Hike Recommendations for Pakistan
In response to circulating media reports, the International Monetary Fund (IMF) resident representative in Pakistan has categorically denied any plans to request an increase in taxes on salaries and business income, as well as an elevation of the maximum threshold for petroleum levy.
Contrary to earlier claims that the IMF was urging Pakistan to reduce the number of tax slabs for both salaried individuals and the business class from seven to four, potentially impacting the middle and upper-middle income groups, IMF’s resident representative, Esther Perez Ruiz, clarified in an email to Reuters that “there are no plans at this time.”
Currently, Pakistan operates under a caretaker government following the approval of an IMF loan program in July, which played a crucial role in averting a sovereign debt default. The $3 billion stand-by arrangement (SBA) facilitated an initial disbursement of $1.2 billion in July, stabilizing the nation’s precarious balance of payments situation.
Pakistan had been grappling with a severe balance of payment crisis, marked by dwindling foreign exchange reserves equivalent to just three weeks of controlled imports. The country also faced historically high inflation rates and an unprecedented devaluation of its currency.
As part of the bailout agreement, the IMF mandated Pakistan to generate $1.34 billion in new taxation to address fiscal adjustments. These measures, however, contributed to an all-time high inflation rate of 38 percent year-on-year in May, making it the highest in Asia. Despite efforts, inflation levels continue to hover above 30 percent.
The IMF’s recent clarification serves to dispel speculations and emphasizes the current absence of plans for further taxation measures in Pakistan.