Tax the rich, protect the poor, IMF Chief asks Pakistan

While Pakistan seeks to access funding from the International Monetary Fund (IMF) to maintain its economy, the international lender has advised the South Asian country to safeguard the poor and increase taxes on the wealthy, reports Al Jazeera.

Speaking over the weekend with German broadcaster Deutsche Welle on the sidelines of the Munich Security Conference, IMF Managing Director Kristalina Georgieva said: "What we are asking for are steps Pakistan needs to take to be able to function as a country and not to get into a dangerous place where its debt needs to be restructured."

The IMF director acknowledged that Pakistan needs to protect its poor in light of last year's devastating floods, which submerged more than one-third of the country and resulted in damage estimated to be worth more than $30 billion.

"I want to stress that we are emphasising two things. Number one, tax revenues. Those who can, those that are making good money, public or private sector, need to contribute to the economy," she said.

"Secondly, to have a fairer distribution of the pressures by moving subsidies only towards the people who really need it. It shouldn't be that the wealthy benefit from subsidies. It should be the poor [who] benefit from them. We want the poor people of Pakistan to be protected."

The comments by Georgieva came at the back of a 10-day visit to Islamabad by an IMF delegation, which failed to result in the two sides signing an agreement that would unlock the $1.1 billion tranche that Pakistan immediately requires.

However, after the IMF team left on 10 February, Pakistan Finance Minister Ishaq Dar said the government has agreed to the conditions set by the fund before it releases the money. Last week, Dar presented a $643 million finance bill in Pakistan parliament, which included measures to increase taxes and hike fuel prices.

As Pakistan and the IMF continue to engage virtually, the international lender has given the country a deadline of 1 March to implement the financial measures.

Pakistan entered a $6 billion IMF programme in 2019, which was expanded to $6.5 billion last year. It received a tranche of $1.17 billion in August last year as part of a combined seventh and eighth review. The ninth review is delayed, pushing 220 million people to the edge.

According to the latest figures by the central bank, Pakistan's foreign reserves are just more than $3 billion, enough to cover less than three weeks of imports.

Karachi-based economist Kaiser Bengali told Al Jazeera that while he appreciated the sentiments expressed by the IMF chief, increasing taxes will further hit the economy.

"Raising the burden of taxes on a stagnant economy will shrink the economy further, causing more unemployment and poverty. This is Public Finance 101," he said.