In Focus
Pakistan secures three-year IMF aid package worth USD seven billion
On 12 July, the IMF announced that it had reached a three-year aid package deal worth USD seven billion with Pakistan, which after validation by the Executive Board, should enable the country to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth.” This will include measures such as strengthening fiscal and monetary policies, reforming the tax base, strengthening competition, and enhancing human capital. A statement noted that Pakistani authorities and the IMF team reached a “staff-level agreement on a comprehensive program endorsed by the federal and provincial governments, that could be supported by a 37-month Extended Fund Arrangement (EFF) in the amount equivalent to SDR 5,320 million (or about USD seven billion at current exchange rates).” The statement further detailed the programme “aims to capitalise on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth.”
Pakistan has been struggling with economic problems for a while, with COVID-19 exacerbating the issue, along with the effects of the war in Ukraine and record flooding in 2022. A debt crisis forced Pakistan to turn to the IMF and obtain its first emergency loan in 2023. The latest SLA will be in the form of loans, and was extended after the government committed to implementing reforms such as broadening the tax base by increasing revenues through measures of 1.5 per cent in FY25 and three per cent of GDP over the program. The newly approved FY25 budget targets a general government primary surplus of one per cent of GDP, and provides extra resources to expand social protection. Simpler and fairer taxation methods will support revenue collections by properly incorporating net income from the retail, export, and agriculture sectors.
During FY25, the government is targeting raising USD 46 billion in taxes, a 40 per cent increase from FY24, and reducing fiscal deficit by 1.5 per cent to 5.9 per cent. Though recent months saw a recovery in current account balance, the foreign debt is high at USD 242 billion. The IMF for its part is expecting a two per cent growth this year, with a fall in inflation in 2025 and 2026. Its statement advised restoring energy sector viability and maintaining fiscal risks while refraining from unnecessary expansion of generation capacity. It added: “Promoting private sector and export dynamism by improving the business environment, creating a level-playing field for all businesses, and removing state distortions.” (“Economy gets shot in the arm as $7bn IMF deal clinched,” Dawn, 13 July 2024; “Pakistan, IMF reach SLA on new $7bn loan deal,” The News International, 13 July 2024)
In Brief
ECONOMY
Government forced to introduce new taxes amid IMF scepticism
On 13 July, Dawn reported that the Federal Board of Revenue’s (FBR) Chairman Amjed Zubair Tiwana declared that the government had failed to convince the IMF about its enforcement capabilities for increasing revenues. The failure was linked to a poor track record and trust deficit, which lead to an increase in taxation. During a testimony before the National Assembly’s Standing Committee on Finance, chaired by PPP MNA Syed Naveed Qamar, Tiwana stated: “We opposed some new tax measures and managed to protect agriculture-related things but couldn’t convince them about many others. We tried to explain many challenges but couldn’t protect the salaried class.” Likewise, the government has to impose a sales tax on milk though it does not want to. He highlighted that due to the lack of trust in the government’s performance in the last 75 years, the IMF did not accept the argument. Tiwana emphasized the government's commitment to widening the tax net through effective taxation on retailers, exchange rates, and other government policies. In addition, he emphasized that the “FBR would need to ensure 50 per cent growth in taxes to achieve the 40 per cent growth target.” Tiwana assured the panel that new revenue measures introduced in the new budget would not be withdrawn and enforcement would be the top priority to achieve the revenue collection target assigned to the FBR. He acknowledged that withholding taxes were imposed to compensate for the FBR's weak enforcement. (Khaleeq Kiani, “‘IMF scepticism forces govt to impose new taxes’,” Dawn, 13 July 2024)
Flour supply paused for the second day as mills continued to strike against Withholding Tax imposition by the government
On 13 July, The News International reported on the discontinuation of flour supply for the second day across the country due to the mills demonstrating against taxation measures by the government. Pakistan Flour Mills Association (PFMA) announced these strikes would continue indefinitely until the taxes were withdrawn. PFMA stated: “We don’t want to create any trouble for the public and that is why the flour milling industry continued to supply flour from 6 July 6 to 10 July, particularly given the sanctity of Muharram,” They added that it became difficult to continue the business by the imposition of withholding tax (WHT), arguing that though the demands were submitted to the authorities, no steps were taken. Further, PFMA stressed the success of the strike by the four mills across the country. The new WHT tax stands at ten per cent, which has been imposed at a rate of two per cent on non-filer dealers, two and a half per cent on retailers, and five and a half per cent on flour mills. With this, the price of a 20-kilogram bag now would cost PKR 185. Similarly, as a result of the strike, the flour supply chain was disrupted heavily and impacted by the shortage in flour pockets.
An editorial in Dawn titled, ‘Looming flour shortage,’ stated that “it is hard to argue against the reason compelled flour mills to call a nationwide strike.” It stressed the flour mill owners requested the authorities to “directly collect the said tax from retailers and other players in the chain.” The editorial argued that this was the “deep-rooted problems of inequity and unfairness plaguing our inefficient tax administration.” The editorial further supported the decision of mill owners’ rejection of withholding agents’ status as it will “saddle them with heavy cost” and lead to corruption. The editorial questioned: “What options would the authorities be left with if flour millers refuse to budge from their position?” (“Flour supply disruption enters second day amid taxation dispute,” The News International, 13 July 2024; “Looming flour shortage,” Dawn, 13 July 2024)
JUDICIARY
Two petitions challenge ISI’s power to tap calls and messages
On 12 July, the Islamabad High Court (IHC) admitted a petition filed by six Pakistan Bar Council (PBC) members for a regular hearing, which challenged the federal government’s decision to empower the Inter-Services Intelligence (ISI) to tap citizen calls and messages. The petitioners argued that the notification dated on 8 July 2024 is “ultra vires of the Constitution and the Pakistan Telecommunication (Re-Organisation) Act, 1996.” They further stated that “wiretapping or intercepting calls” is possible only after due process under the Fair Trial Act, of 2013. Advocate Zuberi, one of the petitioners, argued that there was no provision for interception or wiretapping calls under the Telecom Act of 1996. The ISI was authorized by the federal government to “intercept calls and messages” due to national security concerns, in response to questions framed by IHC Justice Babar Sattar in the audio leaks case.
Similarly, a petition was moved before the Lahore High Court (LHC) by an MPA from Jhan, retired major Ghulam Sarwar, which contended that the impugned notification was an invasion of an individual’s privacy. Justice Farooq Haider recommended for a larger bench to hear the petition as it raises legal questions. Sarwar explained that the exercise of unbridled power and discretion was unconstitutional, and it highlighted a violation of freedom of expression and speech. (Wajih Ahmad Sheikh and Malik Asad, “IHC to hear plea against ISI’s call interception powers,” Dawn, 13 July 2024)
SECURITY
Armed clash between Rad tribes in Dera Murad Jamali kills three tribesmen
On 12 July, an armed clash between two groups of Rad tribes in the Dera Murad Jamali area of Nasirabad district killed three tribesmen. A senior police officer stated that: “The cause of the armed attack was honor killing issue which sparked the armed clash.” Some armed men of one group began firing on a member of the rival group, causing him to jump into a canal and drown. After finding out about the attack, the second group started attacking the house of their rivals in Manjodhori. The firing lasted for almost half an hour, in which two people were killed. Local police arrived at the spot after receiving the information and took the bodies to Dera Murad Jamali Hospital. (Ali Jan Mangi, “Three tribesmen killed in Dera Murad Jamali armed clash,” Dawn, 13 July 2024)
AF-PAK
Security forces arrest 120 Afghan nations for illegally crossing into Pakistan
On 12 July, security forces arrested 120 Afghan nationals for illegally crossing into the Pakistani area of Chagai district. They were arrested during a search operation by security forces at the Pak-Afghan and Pak-Iran borders. Officials mentioned that the operation was conducted after a tip-off about the presence of foreigners near borders. During the investigation, Levies officials found that the “arrested Afghan nationals were Uzbek and they were going to Iran illegally in search of jobs.” They were handed over to Afghan border authorities at the Baramcha border crossing point. (Saleem Shahid, “120 Afghan nationals held for illegally crossing into Pakistan,” Dawn, 13 July 2024)
EXTERNAL
Pakistan and Azerbaijan affirm their commitment to boosting ties and bilateral cooperation
On 12 July, Pakistan and Azerbaijan emphasized their commitment to expanding mutually beneficial cooperation in energy, trade, connectivity, defence, and people-to-people linkages. During a meeting with visiting Azerbaijan President Ilham Aliyev, President Asif Ali Zardari highlighted that both countries have excellent relations and underlined the need for more regular engagements between both. He also noted the importance of Gwadar port and stated that central Asian countries and Azerbaijan can benefit from it in terms of trade, connectivity, and tourism. Zardari welcomed the signing of MoUs between the countries, saying these would give a new impetus to bilateral cooperation in fields including commerce, tourism, mines, and culture. Aliyev also agreed on a need to promote business-to-business relations to enhance economic relations. He suggested exploring the possibility of working together in the renewable energy sector.
On the side lines of this visit, a high-level official delegation of Azerbaijan, led by Azerbaijan Minister for Energy Parviz Shahbazov, met Pakistan’s federal minister for Petroleum and Water Resources Dr Musadik Malik, and spoke on enhancing bilateral trade and investment. During the meeting, Musadik highlighted the vast investment opportunities in mines and minerals like gold and copper in Pakistan. The Azerbaijan delegation expressed its keen interest to start working with Pakistan on proposals presented for trade enhancements. (“Pakistan, Azerbaijan agree to enhance bilateral trade, investment,” Dawn, 13 July 2024)
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While PTI is celebrating, they have no idea that the “real” game has begun. The statesman, Nawaz Sharif
- Saad Kaiser
Six years ago today, my brother Siraj Raisani was martyred for raising the flag of Pakistan in Balochistan, how happy he would be today that his son JamalRaisani is continuing his mission. We have not forgotten any testimony!
- Sarfraz Bugti
If you suddenly get the news that Imran Khan has died in jail due to a heart attack
So, what is the first word that will come on your tongue???
- Imran Bilal
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“The federal demand that the provinces raise more revenues is somewhat bizarre.”
-An opinion in Dawn, ‘Expecting too much’
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