File photo. Saul Loeb—AFP
The International Monetary Fund (IMF) on Friday denied media reports claiming the global lender is asking Pakistan to increase income taxes on salaried individuals and businesspersons, as well as increase the maximum threshold for petroleum levy beyond the existing Rs. 60/liter.
Over the past week, several media reports have claimed that the IMF has asked Pakistan to reduce the number of tax slabs for salaried individuals and businesspersons from the existing seven to four, with the most impact on the middle and upper-middle income groups. Similarly, media reports have alleged the lender is seeking an increase in the maximum petroleum development levy for revenue generation.
“There are no plans at this time,” Esther Perez Ruiz, IMF’s resident representative in Pakistan, told the Reuters news agency in an email.
Currently governed by a caretaker government ahead of general elections due on Feb. 8, 2024, Pakistan is in the midst of a $3 billion Standby Arrangement with the IMF, which was approved in July. Last month, the IMF confirmed it had inked a staff-level agreement with Islamabad following the first review under the SBA, paving the way for the release of a second tranche of roughly $700 million. The country received the first tranche of $1.2 billion from the IMF in July.
Despite gradually improving economic indicators, Pakistan continues to have cripplingly low foreign exchange reserves, barely sufficient for a month of imports. Amidst this, it requires IMF support to prevent a balance of payments crisis and rebuild its declining reserves. Under the bailout deal inked in July, Pakistan has imposed a raft of new taxes on various sectors, particularly electricity and gas, which have triggered inflation that continues to remain around 30 percent year-on-year.