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The Pakistan government is optimistic it will meet the International Monetary Fund’s terms for an ongoing $7 billion loan including a higher tax revenue as the fund prepares to visit next month, according to Finance Minister Muhammad Aurangzeb.
The IMF wants Pakistan to broaden its tax base and reach a tax-to-GDP ratio of 13.5%, the official told Bloomberg’s David Ingles and Rebecca Choong Wilkins in a television interview on the sidelines of the Asian Financial Forum in Hong Kong on Monday.
Aurangzeb said that in December, the country reached 10% ratio and “we are well on our way to achieve that target, not only because the IMF is saying that but because from my perspective the country needs to get into that benchmark to make our fiscal situation sustainable.”
Gross domestic product will probably expand 3.5% in the fiscal year ending June, Aurangzeb said. The nation also plans to sell maiden Panda bonds in the next six to nine months, according to the finance chief, who added that the equivalent of $200 million to $250 million in debt is a good place to start.
While the South Asian economy has enjoyed some stability compared to two years ago when an IMF bailout was in limbo, price growth was above 25% and the key rate was at more than two-decades high, it remains in a tough spot.
The government has to increase taxes to secure a fresh $1 billion loan tranche from the IMF or miss the lender’s tax revenue requirement for fiscal year ending June 2025 which could put the bailout at risk, Bloomberg Economics’ Ankur Shukla said in a note on Jan. 8.
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