Pakistan Seeks IMF Loan To Avoid Deflation

(CTN NEWS) – ISLAMABAD – Nuclear-armed and cash-strapped Officials and analysts announced on Monday that Pakistan would impose additional taxes worth 170 billion rupees this month to get a significant bailout, but they also expressed concern that the new taxes might hasten the country’s skyrocketing inflation.

The International Monetary Fund postponed the disbursement of a vital $1.1 billion tranche of a 2019 contract worth $6 billion, which has been on hold since December due to Pakistan’s failure to meet the criteria.

This led to a gloomy forecast from economists and political observers. Following the conclusion of the most recent round of negotiations between Pakistan and the IMF, the fund made several recommendations, including the imposition of new levies.

There is no other option if Pakistan requires the IMF loans, which Pakistan sorely needs, according to economist Ehtisham-ul-Haq.

“The imposition of further taxes implies harsh days are coming for the majority of people in Pakistan who are already facing rising food and energy costs,” he said.

The impasse in the talks between the IMF and Pakistan was seen as a setback for Prime Minister Shahbaz Sharif’s administration, which is trying to avoid default in the face of a deteriorating economic crisis and an uptick in terrorist violence.

With 2 million homes demolished and 1,739 people dead by record-breaking floods last summer, Pakistan is still fighting to recover.

Numerous nations and international organizations pledged more than $9 billion last month at a U.N.-sponsored conference in Geneva to assist Pakistan in recovering and rebuilding after the devastating summer floods.

But economists and Pakistani officials say the money will be given for the projects rather than in cash.

Ishaq Dar, the finance minister for Pakistan, has since stated that to comply with the agreement’s provisions, his team is planning to levy higher taxes and reduce subsidies for gas, electricity, and other services.

The economist Haq predicted that with new taxes, Pakistan’s current inflation rate of 26% would increase to 40%.

However, he asserted in an interview that “life will become more difficult for the common guy” if Pakistan failed to immediately resurrect the IMF loan.

Officials claim that several friendly nations, including China, Saudi Arabia, and the United Arab Emirates, gave Sharif’s administration financial assurances, but they also wanted Pakistan to finish the 2019 IMF program.

Senior Pakistani political analyst Imtiaz Gul predicted that Sharif’s administration would likely increase taxes on people who are currently paying taxes. He said expanding the tax base was necessary but warned that doing so would increase prices for all necessities.

The government is adamant that it would implement additional taxes without harming the poor. According to the administration, the new taxes will only be levied against those who can afford to pay higher taxes to maintain the economy.

The foreign exchange reserves of Pakistan have decreased to just over $2 billion. Just enough to cover imports for ten days. Officials have stated that Pakistan’s discussions with the IMF will begin later on Monday or Tuesday.

Last week, Sharif warned that Pakistan would find it difficult to adhere to the IMF’s requirements.

Since his removal from office by a vote of no-confidence in the house in April, Imran Khan, the former prime minister now the head of the opposition, has warned that Pakistan may soon find itself in a similar situation to Sri Lanka due to the worsening economic crisis.

If Pakistan fails shortly, he has publicly warned that the international community may use the country’s nuclear program as leverage.

Khan claims that a U.S. plan led to the overthrow of his government, a claim that Washington disputes.

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