On April 22, Pakistan’s new Finance Minister Miftah Ismail agreed to the IMF’s proposals to lower fuel subsidies and cancel a tax amnesty program for businesses, promising to pursue structural reforms to help the country’s crisis-plagued economy.
Pakistan received a $6 billion loan from the International Monetary Fund (IMF) in 2019, but delivery has been slowed due to worries about the speed of reforms. On a visit to the IMF during the Washington-based lender’s annual spring meetings, Finance Minister Miftah Ismail, who took office this month after a previous cabinet lost a no-confidence vote, claimed he had “excellent exchanges.”
“They’ve discussed eliminating the fuel subsidy. I concur with them “At the Atlantic Council, Mr. Ismail, a former IMF economist, stated. “We can’t afford the subsidies we’re now providing. As a result, we’ll have to put a stop to it “he stated
He claimed that, in order to escape impeachment, former Prime Minister Imran Khan devised a “trap” for his successors by providing significant fuel and energy subsidies, as well as a tax amnesty scheme for businesses – actions that prevented the IMF loan from being disbursed.
Mr. Ismail told reporters at an event hosted by Pakistan’s embassy
Mr. Ismail told reporters at an event hosted by Pakistan’s embassy that “he provided an amnesty to firms for setting up factories so that they don’t have to pay taxes, or even if they dodged taxes, that’s fine.”
In the face of sky-high global pricing, Mr. Ismail emphasized that some targeted subsidies for Pakistan’s poorest should be maintained. Shehbaz Sharif, the country’s new Prime Minister, has pledged to revive the country’s stagnant economy, which is sure to be a big topic in next year’s elections.
Pakistan has sought international assistance on numerous occasions and has a chronically low tax base. Mr. Ismail stated that Pakistan, the world’s fifth most populated country, needed to transition to a new economic model by reducing barriers and increasing global exports.
“We live in such an elite-benefiting country that nearly every subsidy you can think of goes to the wealthiest people,” he explained. Mr. Ismail stated that his immediate goal was to get double-digit inflation under control — a task made more difficult by the removal of gasoline subsidies — and to jumpstart job creation.
He denied that Pakistan was at risk of defaulting on its loans, despite the country’s $10 billion in foreign reserves and the fact that the majority of its bilateral debt is held by friendly countries such as China, Saudi Arabia, and the United Arab Emirates.
Mr. Sharif has just over a year until he must schedule a general election, prompting experts to wonder if deposing Mr. Khan will backfire, given that his administration inherited an economic catastrophe that will take time to resolve. Mr. Ismail, on the other hand, believes that there is “never a bad time to do the right thing.”
“We should be able to make a difference in a few months if what we claim is true and we are genuinely more capable. And if we don’t, the people will kick us out, which is OK.”