Current tax slabs ‘prohibitive’ but IMF commitments will be honoured, says PM

Prime Minister Shehbaz Sharif on Wednesday acknowledged that the current tax slabs “are prohibitive”, hampering business operations and investments.

“However, we are under an International Monetary Fund (IMF) programme, and we need to honour our commitments with the global lender.

“We will say them [IMF] goodbye forever, but when the time comes. At this point and time, we need to build this relationship and achieve those targets,” he said.

PM urges authorities to address revenue shortfall, meet IMF targets

PM Shehbaz made these remarks while addressing business persons at the Pakistan Stock Exchange (PSX) in Karachi.

Pakistan’s $350 billion economy has for decades struggled with boom-and-bust cycles, needing 23 IMF bailouts since 1958.

In July last year, Pakistan inked a 37-month Extended Fund Facility (EFF) with the Washington-based lender. The next review by the IMF of its $7 billion, 37-month loan programme to Pakistan is expected in February.

PM Shehbaz said that despite a tax shortfall of Rs400 billion, Pakistan’s tax-to-GDP ratio has improved to 10.8%, exceeding the IMF-assigned target of 10.6%. “But this is not enough,” he said.

He said the country has achieved macroeconomic stability and the journey towards economic growth has been initiated.

“However, we need to convert this stability into economic growth. That is our main challenge.”

The prime minister invited experts to provide their input towards achieving sustainable growth.

“Things would heat up when we move towards growth, but we need to manage it,” he said.

“We have to move bravely, but with caution and prudence,” he said.

Talking about PIA privatization, Shehbaz said that this “privatization will be entirely transparent”.

The prime minister also praised PSX for being awarded the title of the second-best-performing stock exchange in the world in 2024.

The PSX performed exceptionally well as the benchmark KSE-100 Index jumped 85% in PKR terms (87% in USD) last year, concluding 2024 at 115,126.9 points.

Addressing the attendees, Finance Minister Muhammad Aurangzeb reiterated that the country achieved macroeconomic stability after reaching an agreement with the IMF.

“The growth in PSX is a reflection of investor’s confidence in the country’s economy,” said Aurangzeb.

The finance minister said the government has been able to manage its finances through reforms in bureaucracy, and pension among others.

The senator said the government has lowered its debt stock and debt servicing.

“It’s all about implementation and execution of the structural reforms because this is the only way we would move forward from stabilization to sustainable growth,” he said.

Aurangzeb said that the increase in number of investors at the PSX from 330,000 to 365,000 in nine months “is a move in the right direction”.

He said the stock exchange has to play a vital role in the country’s growth.

“As a former banker, I can say that this country’s dependency on banks is huge. That is where the equity capital markets have to come in and play their role,” he said.