Daily Times

As the International Monetary Fund (IMF) left Pakistan after unscheduled talks, Finance Minister Aurangzeb told media on Sunday that everything is on the right track. Really? Perhaps, the busy schedule did not allow the minister to go through a reminder-type note issued by the IMF team in Washington. The note spotlights key challenges in the country’s economic framework, such as fiscal discrepancies, low tax collection and structural inefficiencies. The note advises Pakistan to address these to secure further financial assistance.

One contentious issue is Maryam Nawaz’s Punjab’s fiscal performance. Initially reported as a deficit of Rs 160 billion, the province revised its accounts to show a Rs 40 billion surplus by excluding a Rs 200 billion pension provision. This revision turned Punjab into a cash surplus contributor and helped Pakistan meet its quarterly provincial surplus target of Rs 360 billion. However, smaller provinces pushed back against the IMF’s call to reduce subsidies. Their concerns carry meat that removing wheat price supports could lead to food insecurity in underdeveloped regions.

Taxation remains a pivotal concern. While the government has committed to introducing mechanisms to collect agricultural income tax by January 2025, the challenges are immense. Despite a potential revenue of Rs 230 billion, current collections stand at under Rs 10 billion. Weak land records and a lack of enforcement capacity hinder efforts to bring agriculture, a historically under-taxed sector, into the tax net.

To address these challenges, Pakistan needs a multi-pronged strategy. First, it needs to strengthen provincial coordination and ensure transparency in accounting to avoid last-minute revisions that undermine credibility. Second, launching robust public awareness campaigns is the need of the hour. Moreover, we need to simplify tax filing processes to encourage compliance, especially among farmers. Investment in land record digitization can streamline agricultural tax collection. Also, empowering provinces with technical assistance and financial resources can make wonders. This includes supporting capacity building for managing the Benazir Income Support Programme and higher education funding.

The only good sentence in the IMF is about acknowledging Pakistan’s capacity constraints and promises of technical support. However, progress will depend on consistent implementation of reforms and political will. *