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Al Jazeera
Al Jazeera
World
Abid Hussain

IMF to crisis-hit Pakistan: Tax the rich, protect the poor

IMF Managing Director Kristalina Georgieva was speaking on the sidelines of the Munich Security Conference [File: Ahmed Yosri/Reuters]

Islamabad, Pakistan – The International Monetary Fund (IMF) has urged Pakistan to protect the poor and impose more taxes on the wealthy as the South Asian nation seeks to unlock funds from the global lender to keep its economy afloat.

Speaking over the weekend with German broadcaster Deutsche Welle on the sidelines of the Munich Security Conference, IMF Managing Director Kristalina Georgieva said: “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.”

Acknowledging last year’s devastating floods, which left more than one-third of Pakistan inundated and caused damage estimated at more than $30bn, the IMF chief said it wants Pakistan to protect its poor.

“I want to stress that we are emphasising two things. Number one, tax revenues. Those who can, those that are making good money, public or private sector, need to contribute to the economy,” she said.

“Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need it. It shouldn’t be that the wealthy benefit from subsidies. It should be the poor [who] benefit from them. We want the poor people of Pakistan to be protected.”

The comments by Georgieva came at the back of a 10-day visit to Islamabad by an IMF delegation, which failed to result in the two sides signing an agreement that would unlock the $1.1bn tranche that Pakistan immediately needs.

However, after the IMF team left on February 10, Pakistan’s Finance Minister Ishaq Dar said the government has agreed to the conditions set by the fund before it releases the money. Last week, Dar presented a $643m finance bill in parliament, which included measures to increase taxes and hike fuel prices.

As Pakistan and the IMF continue to engage virtually, the lender has given the country a deadline of March 1 to implement the financial measures.

Pakistan entered a $6bn IMF programme in 2019, which was expanded to $6.5bn last year. It received a tranche of $1.17bn in August last year as part of a combined seventh and eighth review. The ninth review is delayed, pushing 220 million people to the edge. According to the latest figures by the central bank, Pakistan’s foreign reserves are just more than $3bn, enough to cover less than three weeks of imports.

Karachi-based economist Kaiser Bengali told Al Jazeera that while he appreciated the sentiments expressed by the IMF chief, increasing taxes will further hit the economy.

“Raising the burden of taxes on a stagnant economy will shrink the economy further, causing more unemployment and poverty. This is Public Finance 101,” he said.

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