Finance Minister Ishaq Dar on Thursday reiterated allegations of “geopolitics” being responsible for the International Monetary Fund (IMF) not reviving a stalled loan program, as he maintained that as a sovereign nation, Pakistan cannot blindly accept everything the lender demands.
Appearing before the Senate Standing Committee on Finance, he clarified that negotiations with the IMF were ongoing, adding that he hoped the ninth review would be completed this month. However, he stressed, whether or not the $6.5 billion Extended Fund Facility (EFF) were revived, Pakistan would meet all its debt obligations. Lamenting that the IMF had not given any reason for the “unnecessary delay” in completing the ninth review, he reiterated that Pakistan would not default whether or not the program were revived.
Maintaining that the IMF’s “delays” suggested a political agenda, he described as “unjustified” the lender’s demand for Pakistan to secure $6 billion in funding before it revived the bailout. “Foreign hostile elements want Pakistan to turn into another Sri Lanka and then the IMF negotiate with Islamabad,” he alleged. Explaining that Pakistan had already arranged guarantees of $3 billion from Saudi Arabia and the U.A.E., he claimed the World Bank and the Asian Development Bank had committed the remaining $3 billion. China’s commercial banks, he said, had agreed to roll over loans to Pakistan.
The minister also reiterated his criticisms of the financing gap calculated by the IMF, saying it was projected at $6 billion based on an estimated $7 billion current account deficit. However, with the deficit now estimated to be $4 billion, he said, the financing gap projections should also be reduced.
To a question, Dar said he had been unwilling to consult with the IMF on the proposed budget for fiscal year 2023-24 if it did not first complete the ninth review, but Prime Minister Shehbaz Sharif had intervened a few days before to presenting the budget and provided it to the IMF.
Earlier in the day, IMF Resident Representative to Pakistan Esther Ruiz Perez issued a statement criticizing the proposed budget. She said the government had missed an opportunity to broaden the tax base and reduce tax expenditures, adding the terms of a proposed tax amnesty were against the program’s conditionality. She said that the global lender was ready to help Pakistan refine the budget ahead of its passage from Parliament.
“Pakistan is a sovereign country and cannot accept everything from the IMF,” Dar said in response to the criticisms. “The IMF does not want us to give tax concessions in any sector,” he said, stressing that the government was aware of how much tax it needed to collect, adding this was why the tax target had been increased to Rs. 9.2 trillion in the proposed budget. “This target is apart from tax exemption. No budget is coming from tax-exempt sectors. We will take the IMF into confidence on this,” he said.
On the exemptions granted to the I.T. sector in the budget, he said the government could not submit to IMF’s demands and “ban” concessions for the youth. “We want to give employment opportunities to the youth through development in the I.T. sector,” he said, adding that government had set a target of achieving $15 billion in I.T. exports in the next five years. “I.T. exports were $2.5 billion this year which is very less. We want to take I.T. exports to $4.5 billion in the coming year,” he said.
On a suggestion from the committee to give tax exemptions to freelancers, Dar said they had been allowed to retain 35 percent of their total revenue, while those earning up to $2,000 were exempt from sales tax and could also procure duty-free hardware.
To another question on external obligations, the finance minister said the government had restricted imports to curb depletion of its foreign exchange reserves and ensure all payments were made on time. Due to this policy, he claimed, no payments, including international bonds, had been delayed, vowing no payments would be deferred in future either. He said the government was considering lifting restrictions on imports, adding he hoped to give good news on this by the end of the month. However, he added, wheat, fertilizer and currency were being smuggled to Afghanistan, stressing this must be stopped.