Pakistan’s army chief’s attempted charm offensive in the US notwithstanding Pakistan’s economic situation has not changed. Even if the army chief met with the Secretaries of State and Defense and top officials at the White House, Pakistan will still need to abide by its international obligations, especially to Bretton Woods institutions.
During a recent meeting, the International Monetary Fund (IMF) urged Pakistan to slash the number of tax slabs for the salaried and business class from the existing seven to four. “The proposal was floated by a technical mission of the IMF that completed its two-week review of Pakistan’s tax policies. The mission also recommended an increase in the existing reduced sales tax rates to the standard 18%, except for some essential goods, the sources added.” However, Pakistan has expressed reluctance “as the salaried class is already buried under heavy taxation.”
This is not the only recommendation from IMF. In the past the IMF asked Pakistan “to increase the tax contribution from agriculture and real estate sectors.” The IMF has “also suggested that Pakistan should end the preferential sales tax rates being administered under the 8th Schedule of the Sales Tax Act. This will result in an increase in the sales tax rates on dozens of goods to the standard 18%. The IMF recommended that some of the sensitive goods, such as food products, may still be charged reduced rates.”
The army chief’s visit may have gone off well on the propaganda front, but in reality, things have not changed for Pakistan. A few million dollars of investment by Pakistani-Americans in universities will not change the reality of Pakistan’s $130 billion debt or that it will need another – 24th – loan from the IMF very soon.