Pakistan must ensure high earners pay taxes-only poor get subsidies: IMF MD


KARACHI: The International Monetary Fund’s (IMF) managing director has said that Pakistan must ensure that its high earners pay taxes and only the poor get the subsidies if it wants to function as a country. 

“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,” Kristalina Georgieva told German broadcaster Deutsche Welle on Friday on the sidelines of the Munich Security Conference.

“What we are asking for are steps Pakistan needs to take to be able to function as a country and not to get into a dangerous place where its debt needs to be restructured,” she said.

“I want to stress that we are emphasising two things. Number one, tax revenues. Those who can, those that are making good money [in the] public or private sector need to contribute to the economy. Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need it,” she said.

“It shouldn’t be that the wealthy benefit from subsidies. It should be the poor [who] benefit from them,” she said, adding that IMF was very clear that it wanted the poor people of Pakistan to be protected.

The IMF chief’s statement came days after two sides could not reach a deal earlier this month and a visiting Fund delegation departed Islamabad after 10 days of talks but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

Talks centre around reaching an agreement on a reforms agenda under the country’s $6.5 billion bailout programme, which it entered in 2019. An agreement on the ninth review of the programme would release over $1.1bn.

Meanwhile, foreign exchange reserves held by the State Bank of Pakistan have fallen to around $3bn, barely enough to cover three weeks of controlled imports. A resumption of the IMF programme would also unlock other avenues of funding for Pakistan.

The IMF has earlier said in a statement that both sides have agreed to stay engaged and “virtual discussions will continue in the coming days to finalise the implementation details” of the policies, including the tax measures, discussed in Islamabad.

The government is in a race against time to implement the tax measures and reach an agreement with the IMF.

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