Perez Ruiz said the new tax amnesty scheme proposed by the Pakistani government runs against the IMF programme’s conditionality and creates a damaging precedent
The International Monetary Fund (IMF) has expressed dissatisfaction with Pakistan’s budget proposals announced by Finance Minister Ishaq Dar for fiscal year 2023-24, calling them a “missed opportunity” to broaden the tax base and criticised the new amnesty scheme that “creates a damaging precedent”.
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The draft budget missed the opportunity to broaden the tax base in a more progressive way, Esther Perez Ruiz, the IMF Resident Representative for Pakistan, said.
The Pakistan government unveiled a Rs 14.4 trillion budget for 2023-24 in the National Assembly last week as it battled to fend off a looming default due to shrinking foreign reserves.
Esther Perez Ruiz said that the long list of new tax expenditures further reduces the fairness of the tax system and undercuts the resources needed for greater support for vulnerable Benazir Income Support Programme (BISP) recipients and development spendings.
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The IMF, however, expressed its readiness to work with Islamabad to refine the budget ahead of its passage in Parliament.
The IMF expressed disapproval over the new taxation proposal that seeks to enhance the limit in sub-section (4) of section 111 of the Income Tax Ordinance 2001 to rupee equivalent of $100,000.
Perez Ruiz said the new tax amnesty scheme proposed by the Pakistani government runs against the IMF programme’s conditionality and creates a damaging precedent.
Ruiz further said that measures to address the energy sector’s liquidity pressures could be included alongside the broader budget strategy, the report said.
The IMF official had earlier pointed out that the lender had time only for one board meeting before the current programme ends.
Pakistan’s efforts to unlock access to the already agreed USD 6.5 billion loan package are in a quagmire as the budget needs to satisfy the global lender to secure the release of more bailout money for the cash-strapped country.
The programme’s ninth review is still in the doldrums as the deadline nears, while the tenth review, which was originally part of the plan, is all but out of the question.
It is feared that Pakistan might default on external financing commitments without the active support of the IMF fund.
(With inputs from agencies)
