Islamabad: Pakistan engaged in discussions with the International Monetary Fund (IMF) last week regarding its $7 billion bailout reform agenda, according to Finance Minister Muhammad Aurangzeb. The unscheduled visit by IMF staff, which focused on economic reforms, did not result in plans for new taxes, Aurangzeb stated on Sunday.
The discussions in Islamabad occurred just six weeks after the IMF approved the bailout—an unusual step, as the Fund typically reviews reform plans under loan programs before holding such talks. The first formal review of Pakistan's reform progress is slated for the first quarter of 2025.
Aurangzeb, in a statement aired on state television, revealed that the talks covered critical areas such as taxation reforms, energy sector adjustments, privatization of loss-making state-owned enterprises (SOEs), and improvements in public finance management.
Following the visit, the IMF expressed encouragement over Pakistan's reaffirmed commitment to economic reforms under the Extended Fund Facility approved in September, which aims to address economic vulnerabilities. However, unnamed finance ministry sources suggested the IMF's visit was triggered by significant gaps in reform implementation.
Key challenges include a revenue shortfall of nearly 190 billion rupees ($685 million) during the first quarter of the current fiscal year and an external financing gap of $2.5 billion. Additionally, Pakistan failed in its attempt to privatize its national airline, further complicating the economic landscape.
Concerns over the need for new taxes to bridge these shortfalls were dispelled by Aurangzeb, who emphasized that enforcement and compliance would address the revenue gap. "We will focus on strict enforcement to ensure tax compliance," he said, urging all sectors to contribute to the nation's economic recovery.
The IMF underscored the importance of maintaining prudent fiscal and monetary policies and broadening the tax base. With its $350 billion economy historically plagued by cyclical crises, Pakistan has turned to the IMF for financial assistance 23 times since 1958.