ISLAMABAD: Pakistan’s Minister for Finance and Revenue Senator Muhammad Aurangzeb has expressed his confidence about the approval of the staff-level agreement by the International Monetary Fund’s (IMF) Board of Directors this month.
Addressing the “Climate Action for Pakistan” event hosted by Acumen Pakistan on Tuesday, the finance minister also indicated that there would be discussions with the IMF management board regarding climate financing.
Last month, Pakistan and the IMF reached an agreement for a $7 billion, 37-month loan with strict measures such as increasing tax on farm income. The staff-level agreement was finalized after negotiations that started in May. Islamabad has just completed a short-term, $3 billion programme that helped to stabilize the economy and avert a debt default.
Aurangzeb also assured that Pakistan’s “economy is on a path to stability”, with ongoing reforms to achieve sustainable economic growth and development.
The federal finance minister stressed the need for expanding the tax system, implementing energy sector reforms, improving transparency and enhancing governance.
Under the IMF agreement, the highest effective tax rate can rise to as much as 45 percent from the current 15 percent. It will be implemented from 2025, a move that was termed “unprecedented” by experts.
They say these changes could contribute to inflation, especially the food prices, affecting consumers countrywide, adding that larger farmers would be affected more. Inflation averaged close to 30 percent in FY23 and 23.4 percent in FY24, which ended on June 30.
Muhammad Aurangzeb emphasized the need for effective projects to address climate change challenges and advocated for active participation and financing from the private sector. He noted that climate change is a global issue impacting many regions.
He said that Pakistan is among the countries affected by climate change and in 2022 floods, it suffered massive destruction estimated at $30 billion.
