Pak PM Shehbaz Sharif starts work, orders team to approach IMF for $1.2 bn loan

Newly elected Pakistan PM Shehbaz Sharif has asked his authorities to quickly work out terms with the International Monetary Fund (IMF) for the last tranche of $1.2 billion. The global lender has already provided two tranches of the $3 billion bailout programme. The bail programme is set to end by March or early April.

Sharif reportedly ordered to expedite talks for a new loan after Finance Secretary Imdad Ullah Bosal briefed him in a meeting, a statement issued by the PMO, Bloomberg reported. 

Besides this, Pakistan had planned to seek a new loan of at least $6 billion from the IMF. Pakistan was able to avert a financial default in 2023 after the IMF issued a short term bailout programme. Before getting the bailout programme, the cash-strapped nation had to undertake a slew of measures demanded by the IMF, including revising its budget, a hike in its benchmark interest rate, and increases in electricity and natural gas prices.

Last week, it was reported that the IMF had suggested Pakistan several measures such as increasing taxes, reducing tax slabs, and eliminating tax exemption on the contribution of private employers to pensioners, to yield additional revenues for the cash-strapped government.

In its report, IMF stated that if the recommendations on Personal Income Tax, suggested by it, were fully implemented, it could yield additional revenues of 0.5 per cent of the GDP, equivalent to Pakistani Rs 500 billion on an annual basis.

Pakistan's Federal Board of Revenue has so far collected Pakistani Rs 215 billion from the salaried class in the first eight months (July-February) of the current fiscal year.

IMF said that its recommendations to the FBR would double the tax burden for salaried and non-salaried classes and would impact the middle and upper middle-income groups if accepted.

It is estimated that the FBR could fetch approximately Pakistani Rs 300 billion from the salaried class, and the IMF’s recommendation on personal income tax could bring additional revenues of Pakistani Rs 500 billion from both salaried and non-salaried classes.

The IMF has asked the FBR to review the Second Schedule and Chapter III of the Income Tax Ordinance (ITO) to eliminate preferential treatment to employees in specific sectors, tax credit for investment in shares, deduction for mortgage payments, tax deductions for full-time teachers and researchers and maintain the zero rate threshold at the same levels if it is not possible to reduce it.

Earlier, the IMF’s review mission was scheduled to visit the cash-strapped country in the first week of February, but the delegation refused to visit on the eve of the general elections.

(With PTI inputs)