The IMF resident representative in Pakistan refuted media reports on Friday, dismissing claims that the lending organization intends to urge Pakistan to raise taxes on salaries and business income, as well as to increase the maximum threshold for petroleum levy.
Reports circulating in the media suggested that the IMF had advised Pakistan to reduce the number of tax slabs for both salaried individuals and businesses from seven to four, potentially resulting in higher tax burdens for the middle and upper-middle income brackets. Additionally, there were reports indicating a potential increase in the maximum petroleum development levy.
Esther Perez Ruiz, IMF’s resident representative in Pakistan, clarified in an email to Reuters that there are currently no plans to implement such measures.
Pakistan, currently under a caretaker government, had entered into an IMF loan program in July to prevent a sovereign debt default. Through the $3 billion standby arrangement (SBA), Pakistan received an initial tranche of $1.2 billion from the IMF.
Facing a severe balance of payment crisis, with foreign exchange reserves dwindling to the equivalent of barely three weeks of controlled imports, along with record-high inflation and unprecedented currency devaluation, Pakistan sought assistance from the IMF.
As part of the bailout agreement, the IMF required Pakistan to generate $1.34 billion in new taxation to address fiscal adjustments. However, these measures contributed to a record high inflation rate of 38 percent year-on-year in May, the highest in Asia, which continues to hover above 30 percent.
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