The International Monetary Fund (IMF) has identified corruption, bureaucratic red tape, and a weak business environment as the primary challenges hindering Pakistan’s development.

In response, the government has assured the IMF of taking firm steps to address these issues, including greater transparency and accountability in the public sector. The government has also assured the IMF of curbing corruption and abuse of power.

According to a recent report presented to the global lender, the government plans to disclose the assets of senior bureaucrats to combat corruption. Much like politicians, public officials in grades 17 to 22 will now be required to reveal their domestic and foreign assets, including those held by their families.

This change, to be implemented through amendments to the Civil Service Act, is expected to be completed by February 2025. Once these amendments are made, the Federal Board of Revenue (FBR) will digitize the asset declaration system.

The government has also committed to strengthening the National Accountability Bureau (NAB) to ensure more effective oversight and investigation of corruption cases. Public officials will be held accountable and prevented from building illegitimate assets, the IMF has been assured.

Following the Supreme Court’s decision to grant NAB greater independence, the government has vowed to improve its investigative capabilities and address political accusations that often hinder the conviction of corrupt officials. It has also committed to tackle the lack of convictions on corruption, political accusations and weak investigative capabilities.

The IMF welcomed these commitments, emphasizing that strong governance and robust anti-corruption institutions are critical to Pakistan’s economic reforms and development. However, the Fund also warned that vested interests had great influence in government affairs and could impede or even reverse these reforms.

To further ensure transparency, Pakistan has pledged to publish an actionable anti-corruption plan by July 2025. The country also plans to release a comprehensive report on the implementation of the United Nations Anti-Corruption Convention as part of its broader commitment to global standards.

The government has sought the IMF’s assistance in governance and corruption assessments as it pushes forward with its reform agenda.

Meanwhile, the IMF has revealed that Pakistan will need a staggering $110 billion in external financing over the next five years. According to details, this urgent need came on the heels of Pakistan’s successful management of $18.81 billion in external financing for the current year.

The IMF’s report has outlined that the ability to meet debt repayment obligations hinges on effective policy implementation and timely external funding.

Notably, the assurances had been secured for the rollover of $16.8 billion in loans this year from countries such as China and Saudi Arabia, along with additional funding of $2.5billion from the Asian Development Bank and the Islamic Development Bank.

Looking ahead, Pakistan is expected to roll over $6.6billion in loans owed to international commercial banks over the next three years, with an estimated $14billion likely to come from global financial institutions by 2028.

Putting rumours to the rest, the Federal Bureau of Revenue (FBR) on Monday said that the September 30 deadline for the submission of tax returns was not being extended.

In a statement issued today, the tax regulatory authority clarified that media reports about extension of income tax returns filing date “are untrue”.

“All taxpayers are urged to file their income tax returns immediately to avoid penalties and legal action,” it added.

Traditionally, the FBR, in recent years has adopted the practice of extending the tax return submission deadline. Last year, the authority pushed the date for the filing of tax returns to October 31.

Earlier, sources claimed that the deadline for filing income tax returns for the year 2023-24 may be extended by 15 days for individuals, associations of persons, businessmen and companies.

In June, Prime Minister Shehbaz Sharif-led administration in its tax-heavy budget passed in June, set out an ambitious taxation plan to boost its prospects of securing a fresh bailout deal with the International Monetary Fund (IMF) — which it eventually did as the programme now awaits the approval of the Fund’s executive board.

Tax shortfall fears

Earlier this month, The News reported that the FBR has proposed drastic measures to avoid a possible shortfall in tax collection including freezing bank accounts and imposing a ban on the purchase of property and vehicles for tax evaders.

Sources said that an internal assessment of the FBR has shown a tax shortfall of over Rs220 billion for the first quarter (July-September) against the agreed target of Rs2,652 billion.

The authority faced a shortfall of Rs98 billion in August 2024. The FBR had collected Rs1,456 billion in the first two months (July and August) against the assigned target of Rs1,554 billion leaving the body with the challenging task of fetching Rs1,196 billion during the ongoing month to materialise the first quarter agreed target with the International Monetary Fund (IMF).

The annual tax collection target of FBR envisaged Rs12,970 billion, which was approved by parliament (Rs12,913 billion).

Speaking to the publication, official sources confirmed that the FBR identified two million nil filers out of the total of six million return filers.

Suggesting to categorise non-filers into three categories, the authority has recommended the government impose a fine of Rs1 million for incorrect/incomplete tax returns.

The FBR official further added that “nil filers” would have to face severe action including freezing of their bank accounts and a ban on the purchase of properties or vehicles with an immediate effect.

Whereas, those evading payment of tax amounts ranging from Rs0.5 million to Rs1 million will face disconnection of electricity and gas connections.

It is to be noted that previously, the tax collection body also ordered the disconnection of mobile phones of 0.5 million non-filers, but it could not achieve the desired results.

The FBR, in the third category, tabled the recommendation that if the tax dodgers were under filers up to the tune of Rs1 million or more, it would also propose some more measures against them.

Furthermore, the tax authority had decided to outsource audits of high-net-worth individuals (HNWs) and companies.

The State Bank of Pakistan (SBP) reduced its policy rate by 200 basis points to 17.5% on Thursday, as headline and core inflation saw a sharper-than-expected decline over the last two months.

The rate cut will be effective from September 13, 2024.

The Monetary Policy Committee (MPC) of the SBP attributed this decision to falling global oil and food prices and a delay in the anticipated increase in administered energy prices.

The central bank, however, warned of potential risks tied to global economic volatility and domestic energy adjustments, urging a cautious approach to future monetary policies.

Inflation fell to 9.6% year-on-year in August, down from 12.6% in June.

Core inflation also dropped to 11.9%, reflecting improved supplies of food commodities and a reduction in domestic demand.

The MPC expects inflation to continue its downward trend but noted that risks remain, particularly related to the timing and scale of adjustments in energy tariffs and the course of global commodity prices.

The SBP’s foreign exchange reserves stood at $9.5 billion as of September 6, despite weak inflows and continued debt repayments.

Remittance inflows and a rebound in exports helped keep the current account deficit contained at $0.2 billion in July 2024.

While the industrial and services sectors are expected to benefit from this policy easing, the agriculture sector faces challenges due to an expected shortfall in cotton production.

Nonetheless, the SBP maintains its projection for GDP growth between 2.5% and 3.5% for FY25.

The central bank also reported that tax collection in July and August 2024 fell short of the Federal Board of Revenue’s (FBR) target, adding pressure on fiscal policy measures to meet revenue goals for the remainder of the year.

This will be critical for maintaining macroeconomic stability, the SBP noted.

The MPC reiterated that its cautious stance on monetary policy remains necessary to control inflation while supporting sustainable economic growth over the medium term.