Pakistan’s Finance Minister, Muhammad Aurangzeb, has expressed confidence in the country’s progress toward meeting the structural benchmarks outlined by the International Monetary Fund (IMF). As the country awaits the first review of its $7 billion Extended Fund Facility (EFF) program, Aurangzeb assured that Pakistan is on track to meet its commitments under the agreement, which is crucial for securing further financial support from the global lender.
Speaking at an event hosted by the Islamabad Chamber of Commerce, Aurangzeb emphasized that the government has made significant strides in fulfilling its obligations, particularly in areas like tax reform and fiscal governance. He pointed to the recent signing of the National Fiscal Pact, a critical step in enhancing the country’s tax collection framework. Additionally, he highlighted the successful passage of legislation on agriculture income tax in several provinces. While the agricultural income tax law has already been approved by Punjab and Khyber Pakhtunkhwa, it was recently passed by Sindh as well. Aurangzeb mentioned that Balochistan is also expected to join this initiative, signaling a broader national commitment to tax reforms.
In a notable development, the Sindh provincial cabinet approved the Agricultural Income Tax Bill 2025 on Monday, marking a crucial step in implementing this reform. Set to come into effect in January 2025, the bill is expected to generate additional revenue from the agriculture sector, a historically under-taxed industry in Pakistan.
As Pakistan prepares for the IMF’s upcoming six-month review of its EFF program, which is set to be conducted by the IMF mission at the end of February or early March 2025, the finance minister expressed optimism that the review would be successful. The first review under the EFF will assess Pakistan’s performance against the fiscal and structural benchmarks set by the IMF, with a report expected by mid-March. According to the IMF’s October report, the review will focus on the country’s compliance with performance criteria, including fiscal targets and structural reforms.
“We are in the right place, and the review should be in good stead,” Aurangzeb told the business community, underscoring the government’s determination to meet the agreed targets. The finance minister further noted that the government has already initiated the process for the upcoming budget, engaging with various stakeholders in a consultative process to ensure that the fiscal strategy aligns with the country’s IMF commitments.
In addition to ongoing tax reforms, Aurangzeb revealed that the government is working to enhance the tax-collecting capacity of the Federal Board of Revenue (FBR). This comes as part of the broader effort to address Pakistan’s revenue shortfall, which has been a persistent issue. The government has committed to strengthening the FBR’s operations, ensuring better compliance and efficiency in tax collection, which is critical for reducing Pakistan’s fiscal deficit.
The finance minister acknowledged the constraints Pakistan faces under the IMF program, including the need for fiscal discipline and structural reforms. However, he expressed confidence that the government’s proactive approach to budget planning and tax reforms would lead to the successful completion of the upcoming IMF review.
With the IMF’s $7 billion EFF program playing a vital role in stabilizing Pakistan’s economy, the government’s progress on the required structural reforms, including fiscal consolidation and tax collection improvements, will be under close scrutiny. The outcome of the IMF review in March will be pivotal in determining the next phase of the EFF program, including the disbursement of further financial support to Pakistan. As the country navigates these challenges, the government’s ability to meet IMF expectations will be crucial in ensuring sustained economic recovery and growth.