With the economic situation looking gloomy in Pakistan and the country being downgraded by Fitch and Moody’s, the International Monetary Fund has called on the nation to impose additional taxes worth PKR 600 billion, reported Express Tribune on Tuesday.
The IMF has estimated that Pakistan may have to take additional revenue measures equal to 0.75% of Pakistan’s GDP, which is around 600 billion PKR. Although the Forex reserves of the State Bank of Pakistan (SBP) currently stand at $7.6bn, out of the total reserves, $2.3bn was credited by China, $3bn deposited by Saudi Arabia, and $1.2bn came from the IMF.
Even though Pakistan has received about $30 billion in remittances in the fiscal year 2022, it has not managed to keep its current account deficit in control, as it still needs around $32 billion this fiscal year to make payments against foreign obligations.
Foreign obligations, as well as rising inflation, are increasing the cost of living for the local population.Fair Observer, citing the Pakistan Bureau of Statistics said that inflation in Pakistan peaked at a historic high of 27.3% in August. But there is a large gap between actual inflation and the government’s inflation target of 11.5% for this fiscal year.
The prices of daily commodities are also getting out of people’s budgets. While the cost of onions has almost doubled, cooking oil prices have risen by around 83%.
The floods in Pakistan, which destroyed almost 40% of the standing crops, are being considered one of the prime reasons for such a massive rate of inflation in the country. The Fair Observer, citing the World Bank, said that the rate of poverty in Pakistan has surged from 2.5% to 4%, which has taken the number of people in poverty from 5.8 million to 9 million.
According to Business Recorder, Federal Minister for Finance and Revenue Muhammad Ishaq Dar, during the question hour session in National Assembly on Monday, said that the outstanding public debt of Pakistan was 49.2 trillion PKR at the end of June 2022. He further said that the country faces a domestic debt of 31.04 trillion and an external debt of 18.16 trillion.
So the chance of Pakistan’s being able to implement the IMF recommendations looks gloomy as the government is already facing heavy criticism on the front of rising inflation and increasing cost of living.