IMF Rejects Pakistan's Tax Break Requests, Insists on Revenue Targets

The International Monetary Fund (IMF) has dismissed Pakistan's plea to reduce property, tobacco, and beverage taxes, maintaining its revenue targets. Pakistan must assure the IMF against provincial interference in wheat procurement. Discussions continue regarding financing under the Resilience and Sustainability Facility, aiming for a USD 1 billion Climate Resilience Fund boost.

The International Monetary Fund (IMF) has declined Pakistan's request to lower transaction taxes in the property sector, according to reports from The News International. This move came despite earlier indications that the IMF might approve a 2 percent withholding tax reduction for property buyers beginning April 2025, contingent on a written agreement.

Furthermore, the IMF has also rejected requests to reduce taxes on tobacco and beverages. The denial extends to the property sector's request for tax relief, while Pakistan and the IMF edge closer to finalizing a Staff Level Agreement. A critical aspect of the agreement is that Pakistan must ensure the provinces refrain from interfering in wheat procurement processes.

The IMF has shown interest in expanding the existing USD 7 billion Extended Fund Facility with funds for climate initiatives under the Resilience and Sustainability Facility. This proposal, which could introduce up to USD 1 billion via the Climate Resilience Fund, awaits approval by the IMF's Executive Board, alongside Pakistan's request for the second tranche release.

Finance Minister Muhammad Aurangzeb expressed optimism about finalizing the agreement soon. However, IMF's Resident Chief in Pakistan, Mahir Binci, reaffirmed that there is no agreement on reducing the withholding tax on property transactions or easing March 2025 targets. Official sources indicated that Pakistan would struggle to meet revenue targets due to anticipated shortfalls, attributed to numerous holidays affecting collection processes.

(With inputs from agencies.)