Pakistan’s Finance Minister Ishaq Dar is bound. Dar, a close aide of the PML-N supremo, was reappointed as Finance Minister, he promised to reduce prices and reduce taxes. But now that talks between Pakistan and the International Monetary Fund are upon us again, his activities will be scrutinized with a fine tooth comb.
Dar, who took over in September, has managed to do little for the economy so far. And now, amid Pakistan’s reluctance to impose additional taxes on petroleum products as prescribed by the multilateral agency, talks between Islamabad and the IMF, which were supposed to take place last month, have not taken place. Analysts tracking South Asian economies said there is no clarity on the revised meeting. This again fueled fears of a sovereign default.
In addition to cutting additional taxes, the IMF’s riders to revive the loan program included a commitment to a tax-to-GDP ratio of at least 11 percent. Although the country’s tax to GDP ratio has improved, it is still in the single digits.
Islamabad has also not fully reported on the economic situation and the use of the first tranche of funds to the IMF due to the floods. As the economic situation in Pakistan worsens, its own allies and even other multilateral agencies have shown reluctance to distribute funds to the South Asian nation.
Pakistan needs more than $32 billion this year to repay debts.
Pakistan’s former Finance Minister Miftah Ismail was instrumental in reviving the stalled IMF loan program. However, as part of the programme, Ismail had to end petroleum subsidies and levy taxes, which came under sharp criticism even from members of his own party.
With headline inflation at 26.6 percent in October – up from 23.2 percent in the previous month, Shehbaz Sharif’s government will find it difficult to impose additional taxes.
The Pakistani rupee after handsome gains against the US dollar in October, has also once lost Sheen.
Battered by major floods and rising political uncertainty, the country’s economic situation has deteriorated only in the last few months.
Now followed by India, Pakistan wants to buy Russian oil at a discount. Islamabad is hoping for an oil market similar to India’s inked oil purchases from Russia.
Analysts, however, said it may not be easy for Pakistan to achieve a similar deal, especially as tensions between Islamabad and Moscow have escalated after claims that Ukrainian officials were in Pakistan to discuss nuclear weapons technology. . Also observers are not sure how the US will react if Pakistan starts importing oil from Russia.
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