IMF Official Links Pakistan’s Economic Challenges to Revenue Generation Issues
IMF Review Mission to Visit Pakistan in March for $7B Loan Discussion
ISLAMABAD: Mahir Binici, the International Monetary Fund (IMF) Resident Chief in Pakistan, has attributed Pakistan’s ongoing economic challenges, particularly its debt burden, to the country’s inability to generate revenue at its full potential. Speaking at a conference on “Retail Reimagined: Innovate, Collaborate and Thrive,” Binici highlighted that the formal sector faces a higher tax burden, while certain sectors are not contributing adequately to the national exchequer.
Binici’s remarks come ahead of a key IMF review mission scheduled to visit Pakistan in the first week of March to hold discussions under the $7 billion Extended Fund Facility (EFF). The successful completion of the first review is considered critical, as Pakistan will need to seek waivers for not meeting certain conditions tied to the loan program.
In September 2024, Pakistan’s Prime Minister Shehbaz Sharif-led government secured approval for the IMF’s fresh loan program, which included a $1.02 billion disbursement. However, the upcoming review could be linked to the approval of Pakistan’s next budget for 2025-26. If both the IMF and Pakistan fail to reach a consensus on key fiscal matters, the completion of the review may depend on parliamentary approval of the budget.
The IMF mission’s visit coincides with a period when Pakistan’s current account shifted from surplus to a deficit, with a $420 million deficit posted in January 2025.
Federal Finance Minister Muhammad Aurangzeb also addressed concerns about the country’s tax system, pointing out that the retail sector contributes 19% to Pakistan’s GDP but only 1% to the tax revenue. He emphasized that the burden of taxation falls disproportionately on the salaried, manufacturing, and services sectors, while informal sectors like agriculture, retail/wholesale, and real estate must contribute more.
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Aurangzeb further stated that strict enforcement measures will be taken against undocumented and informal sectors, which are not contributing to the national revenu
