ISLAMABAD: Prime Minister Shehbaz Sharif is scheduled to meet International Monetary Fund (IMF) Managing Director Kristalina Georgieva next week at a Swiss hilly resort, where he is expected to seek her support for a wide-ranging economic relief package aimed at preventing further industrial decline and easing pressure on individuals amid prolonged economic stress.
Sources in the Prime Minister’s Office confirmed that the meeting is planned on the sidelines of the World Economic Forum gathering. While the Ministry of Finance declined to comment and the IMF did not respond to requests for clarification, officials familiar with the matter said the meeting carries significant weight as Pakistan looks to recalibrate its economic path under the ongoing $7 billion IMF bailout programme.
The upcoming engagement echoes a similar meeting held in mid-2023 in Paris, where Prime Minister Shehbaz had assured the IMF chief of undertaking difficult reforms to avert a sovereign default. While those measures stabilised the economy and prevented default, they also resulted in what officials acknowledge as the highest unemployment and poverty levels in decades. The government now aims to reverse those social and economic costs through a pro-growth agenda.
According to sources, the proposed relief plan has been developed through consultations involving the Special Investment Facilitation Council, the business community, and the Ministry of Finance and Revenue. A key element of the plan includes dismantling tax distortions introduced since 2013, with a focus on substantially lowering income tax rates for both firms and individuals.
Last month, a private-sector-led panel constituted by the prime minister recommended tax reductions amounting to Rs975 billion to support the formal economy. Officials said that once additional components are included, the total cost of the package could rise to between Rs1.5 trillion and Rs2 trillion, depending on the final framework presented to the IMF.
Finance Minister Muhammad Aurangzeb and Finance Secretary Imdad Ullah Bosal are also expected to travel to Davos for the discussions. Observers note that it is unusual for a finance secretary to attend World Economic Forum meetings, highlighting the importance attached to the IMF engagement.
Sources cautioned that major technical decisions are unlikely to be finalised at the leadership level and would instead be taken up during subsequent negotiations, including the third review of the IMF programme scheduled for next month. Officials familiar with the discussions said the IMF may first assess the viability and fiscal impact of the proposed measures before offering any assurances.
In recent weeks, senior policymakers have openly acknowledged growing frustration within the business community over high energy prices and heavy taxation, which they say are discouraging both local and foreign investment. Deputy Prime Minister Ishaq Dar recently remarked that IMF programmes are generally viewed as anti-growth, signalling the government’s intent to push for a more expansionary framework. Finance Minister Aurangzeb has also acknowledged that some companies are exiting Pakistan due to cost pressures, while reiterating the need for a sustainable economic approach.
The proposed plan reportedly includes abolishing levies such as the super tax, deemed income tax on real estate, and capital value tax on foreign assets, which officials say have pushed the effective income tax rate to nearly 60 percent. The government is also considering reducing corporate income tax from 29 percent to 25 percent, cutting the top individual tax rate from 45 percent to 30 percent, lowering salaried class taxation to 25 percent, abolishing the 10 percent super tax, ending inter-corporate dividend tax, and reducing the sales tax rate from 18 percent to 15 percent.
Officials estimate that reducing the standard sales tax alone could have a revenue impact exceeding Rs600 billion annually. The burden on salaried individuals has been particularly severe, with Federal Board of Revenue data showing a 55 percent increase in withholding tax collection from salaries last fiscal year. Former finance secretary Younus Dagha has said that salaried class taxation has risen by 230 percent under the current IMF programme.
The government believes that easing tax pressures could revive stalled domestic and foreign investment, eventually compensating for short-term revenue losses. The plan assumes limited revenue growth in the first year without worsening the tax-to-GDP ratio, with recovery expected in subsequent years.
The proposal may also include commitments to cut state-owned enterprise losses by more than half over three years. However, challenges remain, including delayed implementation of the National Fiscal Pact, slow progress on agricultural income tax by provinces, and stalled harmonisation of general sales tax between the federal and provincial governments.
As Pakistan prepares for the high-level engagement, expectations remain cautious, with officials acknowledging that securing IMF backing for such a sweeping relief package will require convincing the lender of its long-term fiscal sustainability.
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