Finance Minister Muhammad Aurangzeb on Sunday warned Pakistan will have no choice but to keep resorting to International Monetary Fund (IMF) bailouts if it fails to boost its tax revenue.
In an interview with the Financial Times, he reiterated his confidence in securing a staff-level agreement with the global lender this month for an estimated outlay of $6-$8 billion. However, he warned, this could not prove the final program Pakistan seeks if it doesn’t expand its tax revenue intake.
Last month, Prime Minister Shehbaz Sharif admitted on the floor of the National Assembly that the tax-heavy Rs. 18.877 trillion budget for fiscal year 2024-25 was devised with the approval of the IMF as part of efforts to secure a new bailout. The budget has faced much criticism since its introduction, with salaried workers in particular lamenting the hefty hikes to their tax rates even as undertaxed sectors such as retailers, real estate and agriculture continue to enjoy relative impunity.
“We do not have five years for our program,” stressed Aurangzeb. “We have to start showing, start delivering, in the next two to three months,” he said, while pointing to “positive” indicators in the stock market. However, he added, the government faces considerable challenges in putting Pakistan on the path for longer-term growth and debt sustainability.
The minister noted the core issue of Pakistan having to borrow ever-increasing amounts to repay old debts, adding the debt cycle must be broken. “We need to create the capacity to repay loans,” he said. “As long as this economy stays import-based, what happens is the moment it heats up, we run out of dollars we have to go back to the lender of last resort on our knees,” he lamented.
“It’s about time we get real,” he said, maintaining it was up to the government to provide bankable, investable projects to attract foreign direct investment.
During his interview, the finance minister also criticized the Federal Board of Revenue, noting its perception as a corrupt institution was a source of problems. “People don’t want to deal with the tax authority because of corruption, because of harassment, because of people asking for speed money, facilitation money,” he said. “That’s not sustainable,” he continued, adding he empathized with the pain people would feel as a result of new tax measures.