‘Protect the poor, tax the rich,’ IMF asks broke and embattled Pakistan
Virendra Pandit
New Delhi: After Defense Minister Khwaja Asif’s open admission last week that Pakistan is bankrupt and has already defaulted, the International Monetary Fund (IMF) has asked the nearly cashless country to protect the poor and impose more taxes on the wealthy as the South Asian nation seeks to unlock funds from the global lender to keep its sinking economy afloat.
Speaking over the last weekend with German broadcaster Deutsche Welle on the sidelines of the Munich Security Conference, IMF Managing Director Kristalina Georgieva said: “What we are asking for are steps Pakistan needs to take to be able to function as a country and not to get into a dangerous place where its debt needs to be restructured.”
Acknowledging last year’s devastating floods, which left over a third of Pakistan inundated and caused massive damage worth over USD 30 billion, she said the IMF wants Pakistan to protect its poor.
“I want to stress that we are emphasizing two things. Number one, tax revenues. Those who can, those that are making good money, public or private sector, need to contribute to the economy,” she said, the media reported on Monday.
“Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need it. It shouldn’t be that the wealthy benefit from subsidies. It should be the poor (who) benefit from them. We want the poor people of Pakistan to be protected.”
Her comments came on the back of a 10-day visit to Islamabad by an IMF mission delegation in early February, which failed to result in the two sides signing an agreement to unlock the USD 1.1 billion tranches that Pakistan immediately needs.
After the IMF team left on February 10, Pakistan’s Finance Minister Ishaq Dar said the government had agreed to the conditions set by the global lender before it releases the money. Last week, Dar presented a USD 643 million finance bill or ‘mini budget’ in parliament, which included measures to increase taxes and hike fuel prices.
As Pakistan and the IMF continue to engage virtually, the lender has given the country a deadline of March 1 to implement the financial measures.
Pakistan entered a USD 6 billion IMF program in 2019, which was enhanced to USD 6.5 billion last year. It received a tranche of USD 1.17 billion in August 2022 as part of a combined seventh and eighth review. The ninth review is delayed, pushing Pakistan’s 220 million people to the edge.
According to the latest figures from the central bank, Pakistan’s foreign reserves are just USD 3 billion, enough to cover less than three weeks of imports.
With Pakistan sinking into a Sri Lanka-type official default by the day, Defense Minister Khwaja Asif became the first leader in the Shehbaz Sharif government to openly admit Pakistan’s bankruptcy.
During a public address in his hometown Sialkot, he said that Pakistan has already defaulted and blamed the politicians and bureaucracy for the economic crisis in the country, as the law and Constitution are not followed in Pakistan.
“You must have heard that Pakistan is going bankrupt or that a default or meltdown is taking place. It (default) has already taken place. We are living in a bankrupt country,” The Express Tribune newspaper reported him as saying.
“Not the IMF but Pakistan alone can solve our problems.”
Pakistan is currently battling decades-high inflation, critically low foreign exchange reserves, and several debt repayment obligations, aggregating over USD 130 billion. Some of Pakistan’s biggest companies have halted operations in the past months as they ran out of raw materials or foreign exchange, or both.
