SUMMARY of the Article “A Close Watch,” Dawn, October 13th, 2024
This editorial discusses the challenging demands placed on Pakistan by the International Monetary Fund (IMF) as part of its $7bn rescue package. Although tough, these demands were anticipated as necessary for stabilizing the country’s economy. The program aims to rebuild Pakistan’s foreign exchange reserves, improve its tax-to-GDP ratio, and ensure debt sustainability. The IMF’s roadmap for reform includes overhauling the tax system, implementing energy sector reforms, and privatizing and deregulating key sectors. Additionally, the Special Investment Facilitation Council, Sovereign Wealth Fund, and Special Economic Zones will be scaled back to promote investment neutrality. The government has committed to not providing any special tax or regulatory incentives that could distort the investment landscape. If tax collection falls short by 1% on a three-month rolling basis, the government will introduce additional indirect taxes. Other commitments include cutting gas supplies to captive power plants owned by textile millers and provincial reforms to boost tax collection and end market interventions. While the IMF has acknowledged Pakistan’s recent macroeconomic stability, it cautions that this stability is unlikely to lead to growth unless the country can attract significant investment, which seems unlikely in the short term. The elimination of incentives for foreign companies, especially from China, could hinder plans to attract Chinese investment under the China-Pakistan Economic Corridor (CPEC). The IMF will closely monitor Pakistan’s adherence to its reform targets, and there is little margin for error as Pakistan must demonstrate every six » Read More…