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IMF slams new Pakistan budget proposal

ISLAMABAD (AP) — The International Monetary Fund (IMF) slammed Pakistan’s government on Thursday over its proposal for the new annual budget, saying it failed to implement a more fair tax system in the draft.

The harsh criticism by IMF’s representative for Pakistan Esther Perez Ruiz raised new concerns about the success of monthslong talks between the cash-strapped Islamic nation and the lender over a stalled bailout tranche.

However, Perez Ruiz also said the IMF was offering to “work with the government in refining its strategy” for the budget.

The government in Islamabad last week presented the budget in the National Assembly, or lower house of the parliament, for the next fiscal year, starting July 1.

The draft also introduced a new tax amnesty scheme and skipped some of the anticipated taxes.

People wait to use an ATM bank machine in Pakistan. PHOTO: AFP

The proposal was likely an attempt by Prime Minister Shahbaz Sharif to avoid anti-inflation protests and bring relief to the poorest people.

However, it also envisages an up to 35 per cent increase in salaries for government employees, drawing criticism as experts questioned how the administration would generate resources for development projects and salaries at a time when the fiscal deficit was widening to an alarming level.

Lawmakers are expected to debate and vote on the budget sometime later this month.

According to Perez Ruiz, the Pakistani government is missing “an opportunity to broaden the tax base in a more progressive way, and the long list of new tax expenditures reduces further the fairness of the tax system and undercuts the resources needed for greater support for vulnerable” people.

Perez Ruiz also said the new tax amnesty announced in the budget proposal runs against IMF programme’s “conditionality and governance agenda”.

Pakistan is only two weeks left to meet IMF’s conditions to qualify for the much-needed USD1.1 billion tranche, on hold since November.