ISLAMABAD: Left with no option but to knock at the door of the IMF, the new government will be facing the uphill task of coming up with a home-grown ‘reform plan’ to fix the country’s all economic ills.
First of all, the government will have to convince the IMF to provide additional funding than the existing quota of Islamabad on easy and soft conditions, which will never be an easy task.
Only a miracle can save Islamabad from approaching the IMF and it can only happen if Islamabad gets $8 to $10 billion from friendly countries like China and Saudi Arabia to bridge the gap. “In case of approaching the IMF, it will not be easy to convince them for 300 percent additional quota when Donald Trump is sitting as US President in White House,” said an official.
The official reminded that Washington possessed 17 percent share in the IMF’s executive board but its influence on the EU and other countries could not be ignored at all.
If the PTI succeeds in forming its government at the center, it may approach the IMF, as Asad Umar, who is being projected as the finance minister, has hinted at approaching the IMF, arguing that all options were on the table and nothing could not be ruled out including the IMF help.
In his post-election speech, PTI chief Imran Khan had promised to jack up tax collection but the FBR estimates showed that the tax base was going to further shrink in this current fiscal year, as over 1 million taxpayers would be going out of the tax net in the wake of increasing taxable limit from Rs0.4 million to Rs1.2 million and reduction in maximum tax rate from 30 to 15 percent.
These two steps would bring down the total number of taxpayers by over 1 million from 1.429 million taxpayers in 2017-18 to only 0.225 million taxpayers in the ongoing fiscal year in the aftermath of so-called tax reforms approved by Parliament through Finance Act 2018.
“How the PTI government will opt for a strategy to reverse these steps or take additional measures to expand the narrow tax base and increase tax collection simultaneously because the IMF will press upon decreasing the yawning budget deficit that was all set to go close to 7 percent of GDP for the last fiscal year that ended on June 30?” said official sources while talking to The News on Friday.
Although, the Ministry of Finance has not yet firmed up the budget deficit figure for the last fiscal year, it is not possible to decrease it 6.8 to 6.9 percent of GDP keeping in view massive tax and non-tax revenue shortfall and overrun in expenditures during the last financial year.
On external front of the economy, the current account deficit (CAD) peaked to $18 billion, highest ever record in the country’s history at a time when the foreign debt was rising and foreign currency reserves slashed down simultaneously. “There is a difficult path ahead, &nb
