Pakistan aims for 15% tax-to-GDP ratio in upcoming IMF deal

In pursuit of economic stability and fiscal responsibility, Pakistan is targeting a tax-to-GDP ratio of 15 per cent in its forthcoming International Monetary Fund (IMF) deal.

Sources within the Finance Ministry revealed that measures are being taken to maintain state bank reserves equivalent to three months of import bills.

The ministry has outlined a comprehensive strategy, including the reduction of the current account deficit and the preservation of a surplus in the primary balance.

It is anticipated that a new agreement with the IMF will be signed upon the expiration of the current deal, with a commitment to fulfilling specified conditions before finalising the agreement.

Today, the International Monetary Fund expressed its willingness to collaborate with the new Pakistani government, overlooking the demand from Pakistan Tehreek-e-Insaf (PTI) founders for an audit of election results prior to approving any new loan for Islamabad.

Bloomberg News reported yesterday that Pakistan is planning to seek a new loan, estimated at a minimum of $6 billion, from the IMF to address imminent debt repayment obligations.

The negotiations for an Extended Fund Facility with the IMF are expected to commence in March or April.

Having successfully avoided default last summer through a short-term IMF bailout, Pakistan now faces the task of negotiating a long-term arrangement as the existing programme expires next month. The country’s $350 billion economy hinges on the stability provided by such arrangements.

Prior to the bailout, Pakistan implemented a series of measures mandated by the IMF, including budget revisions, an increase in the benchmark interest rate, and adjustments to electricity and natural gas prices.

The IMF continues to engage in dialogue with Pakistani authorities regarding essential longer-term reform efforts.

A spokesperson for the fund affirmed its readiness to support the post-election government through a new arrangement, addressing the ongoing challenges faced by Pakistan.