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A delegation of the International Monetary Fund (IMF) has arrived in Islamabad for the second review of the economic situation of the bailout package given to Pakistan.
IMF and the Federal Board of Revenue could not agree to lower down the target of tax collection. IMF has given a difficult target of collecting Rs 3,520 billion tax by March 31.
According to sources, the IMF is determined to meet the target of collecting tax by imposing additional taxes. However, FBR has said that further taxation will increase inflation.
Approximately, Rs 2,410 billion tax has been collected by January 2020, while Rs 1,110 billion have to be collected in the next two months.
What is IMF?
International Monetary Fund (IMF) is a global financial institution that aims to promote global economic growth and financial stability, encourage international trade and reduce poverty. IMF looks at domestic economies of the countries and their mutual performance, external debt and provides loans and technical assistance to deal with their economic well-being. The IMF provides technical assistance, training, and policy advice to member countries. The IMF lends loans to countries that are experiencing economic distress in order to prevent or mitigate financial crises.
External debt of Pakistan
External debt of Pakistan has reached the highest level in history; external debt has increased by more than $ 105 billion. This is a record increase of 11 percent.
Pakistan owes a debt to Paris Club ($11.3 billion), multilateral and other donors ($27 billion) and other international bonds such as Eurobond and Sukuk ($12 billion). The country has also obtained commercial loans of $8.8 billion and a short-term loan of less than one year stood at $1.1 billion.
The finance ministry told the Senate that more than 26 billion dollars were taken over during the past six financial years. During this period, interest on the loans amounting to $ 7 billion was imposed, after which debt increased to more than the US $ 33 billion.
Loans from IMF
Pakistan has taken loans from the International Monetary Fund (IMF) several times. The last time Pakistan borrowed from the IMF was in 2013. A $6 billion dollar loan agreement has been signed between Pakistan and IMF for which the third installment is under negotiation. The IMF’s goal with debt servicing has always been to reduce the balance of payments by reducing costs.
The IMF sets a target of three and a half to five years for repayment of the loans. Pakistan and the IMF remained affiliated with 7 lending programs, between 1980 and 1995. During the PML-N regime, $ 6.4 million was lent by Pakistan.
Loans in PTI government
In the Pakistan Tehreek-e-Insaaf government, Pakistan borrowed $ 1.8 billion from the allied countries from August 2018 to September 2019. The countries include China and Saudi Arabia. In addition, Pakistan’s total debt increased by over Rs 6 trillion from June 2018 to September 2019. Due to the depreciation of the Pakistani rupee, Pakistan’s debt increased by 28 percent (2.5 trillion). The government borrowed Rs.3.7 trillion to meet the budget deficit.
Internal Debt and How much a Pakistani owe?
When it comes to internal debt from the local banks, internal debt is more than the external debt. In Pervez Musharraf’s tenure, the debt was Rs 3,000 billion, which has increased to Rs 20,000 billion today. The PPP government borrowed Rs 6,000 billion while the PML-N borrowed Rs 9,000 billion. ۔ In Musharraf’s era, every Pakistani was owed 40,000, in the PPP era a Pakistani owed 80,000, in PML-N era 1.5 lakh and currently a Pakistan owed Rs. 1.75 lakh.
Due to the increasing debt of Pakistan, the people living in this nation are facing the worst inflation, increasing taxes and prices of essential commodities have also been increased. In the current negotiation between Pakistan and IMF, if the taxes were once again raised on the terms of IMF it would be difficult for the people who are already suffering from poverty inflation.