Economy gets shots in the arm as $7bn IMF deal clinched

 KARACHI: Pakistan and the IMF reached a 3 years $7billion aid package  deal, the Washington-based institution said on Saturday morning , giving much needed respite to the nation . 

The new programme , which needs to be validated by the funds executive board , should enable Pakistan to cement macroeconomic stability and create conditions for the , more inclusive and resilient growth , according to a statement  faced with chonic mismanagement , pakistans economy as found itself on the drink , challenged by the war in 19 pandemic , the effects of the war in Ukraine and supply difficulties that fuelled and supply inflation , as well as record flooding that effected a third of the country in 2022

With its foreign currency reserves dwindling , pakistan found to trun to the IMF , obtaining its first emergency .loan in the summer of 2023 

The latest bailout , coming to pakistan in the from of loans follows a commitment by the government implment reforms , including a major effort to broaden the countrys text base .

In a nation of our 240m  people and where most jobs are in the infromal sector , only 5.2million failed income text returns in 2022 .

Druing the 2024-25 fiscal years , the Pakistan government aims to raise nearly $46 billion in texts , a 40 percent in crease from the previous years .

"The  programme  aims to capitalise on the hard-won macroeconomic stability achieved over the post years the furthering efforts to strong then public finances , reduces inflation , rebuild external buffers and remove economic distortions to spur private sector lead growth the IMF statement said quoting nathan porter the funds mission chief to pakistan .

In this regard the authorities plan to increase tax revenues through measures of 1.5 per cent of GDP in FY25 and 3percent of GDP over the programme ,  it said . the increase in reveanue collections will be achieved through simpler and fairer direct and indirect taxation including by bringing net income from the retail export and agriculture sectros properly into the text system .

The statement added that federal  and provincial governments have agreed to rebalance spending activities in line with the 18th constitution Amendment by signing a National fiscal pact. under the agreement, subjects including education spending , health , social protection, and regional public 

infrastructure investment will be devolved to provinces. the provinces have already committed to "fully harmonizing  their Agriculture income tax regimes through legislative changes " with the federal and corporate income tex remans . the move will be implemented from jan  1, 2025 . 

The government will also 

improve the power sectors viability and minimise its losses through timely tariff adjustment , reforms and and refraining from further  unnecessary expansion of generation capacity . 

“The authorities remain committed to undertaking targeted subsidy reforms and replace cross-subsidies to households with direct and targeted BISP support.”

The authorities will improve SOE operations and management as well as privatisation, in which the most profitable entities will be prioritised.

The government is also working towards “phasing out” incentives to Special Economic Zones, agricultural support prices and related subsidies, while refraining from new regulatory or tax-based incentives, or any guaranteed return “that could distort the investment landscape. “The authorities have also committed to advance anti-corruption as well as governance and transparency reforms, and gradually liberalise trade policy,” the statement concluded