Pakistani Minister Miftah Ismail agrees with IMF recommendations to cut fuel subsidies and end corporate tax amnesty program

The International Monetary Fund approved a three-year, $6 billion loan for Pakistan in 2019, but disbursement has been slowed by concerns about the pace of reforms

The International Monetary Fund approved a three-year, $6 billion loan for Pakistan in 2019, but disbursement has been slowed by concerns about the pace of reforms

On April 22, Pakistan’s new finance minister accepted IMF recommendations to cut fuel subsidies and end a corporate tax amnesty program, pledging to continue structural reforms to boost an economy. in crisis.

The International Monetary Fund (IMF) approved a three-year, $6 billion loan for Pakistan in 2019, but disbursement has been slowed by concerns about the pace of reforms. Finance Minister Miftah Ismail, who took office this month after a previous government lost a vote of no confidence, said he had “good discussions” with the IMF during a visit during the Washington-based lender’s annual spring meetings.

“They talked about removing the fuel subsidy. I agree with them,” Mr. Ismail, himself a former IMF economist, told the Atlantic Council. “We can’t afford to do the subsidies we give. So we’re going to have to reduce that,” he said.

He said former prime minister Imran Khan, seeking to avoid ousting, had set a ‘trap’ for his successors with heavy fuel and electricity subsidies and an amnesty program corporate tax – measures that derailed an IMF loan disbursement.

“He gave amnesty to companies for setting up factories so they don’t have to pay taxes, or even if they evade taxes, it doesn’t matter,” Mr Ismail said. to journalists at an event organized by the Embassy of Pakistan.

But Mr Ismail added that some targeted subsidies should remain for Pakistan’s poorest amid sky-high world prices. The country’s new prime minister, Shehbaz Sharif, has pledged to revive a moribund economy, which is sure to be a major issue in elections scheduled for next year.

Pakistan has repeatedly sought international support and suffers from a chronically low tax base. Mr Ismail said Pakistan, the world’s fifth most populous country, needed to shift to a new economic model by removing barriers and promoting exports to the world.

“We have a country that benefits the elite so much that almost every grant you can talk about actually goes to the wealthiest people,” he said. Mr Ismail said his immediate aim was to contain double-digit inflation – a goal complicated by the lifting of fuel subsidies – and revive job creation.

He denied that Pakistan was at risk of defaulting on its debts, with foreign exchange reserves currently standing at $10 billion and much of its bilateral debt held with friendly countries China, Saudi Arabia and the United Arab Emirates.

Mr Sharif has just over a year before he is due to call a general election, leaving observers to wonder whether ousting Mr Khan will backfire, as his government inherited an economic crisis that will take hold. time to overcome. But Mr Ismail said there was ‘never a bad time to do the right thing’.

“If what we claim is true and we are in fact more competent, then we should be able to tell the difference in a few months. And if we don’t, we will be kicked out by the people, which is good.”

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