Pakistan’s finance minister on Wednesday announced a range of measures to narrow fiscal and trade deficits ahead of Prime Minister Imran Khan’s expected move to present the government’s case to the IMF for a loan to rebuild confidence in the country’s economy, the Financial Times reported.
Addressing the lower house of parliament, Asad Umar unveiled a cut in import duty on industrial raw materials to raise industrial productivity and help ease a chronic energy crisis that has caused repeated power outages and gas supply interruptions, the Times stated.
Umar also proposed a series of tax measures for investors in the stock market, as well as proposals to cut red tape and lower taxes for small and medium-sized businesses.
“We need to bring a balance in revenue and expenditure as it is vital for growth,” Umar said.
“Our imports are touching a dangerous point. We have to increase exports and bring reforms in agriculture and other sectors”.
Since being elected in August, Khan has focused on staving off a balance of payments crisis after liquid foreign currency reserves fell to the equivalent of about eight to nine weeks of imports, down from more than 12 weeks, mainly due to a widening current account deficit.
So far, Khan has secured at least $11 billion in combined loans from Saudi Arabia, the United Arab Emirates and China to meet its foreign payments in the financial year to June this year.
But he has also drawn up plans to seek a bailout from the IMF.
Economists said an IMF loan was the only way for Pakistan to rebuild confidence and persuade multilateral lenders such as the World Bank and the Asian Development Bank to extend loans to the country, the Times reported.
NDTV meanwhile reported that Pakistan has opened talks with the IMF and although there has so far been no agreement on the terms of what would be its 13th bailout since the 1980s, Khan's government has pledged reforms to bring down its current account deficit, which the IMF expects to reach 5.3 percent of GDP this year.
"We need to create an economy where this IMF program will be Pakistan's last," Umar said.
Pakistan has invested great hopes in the China Pakistan Economic Corridor, part of the mammoth Belt and Road Initiative but it has had to absorb the impact of high imports of capital equipment the project has required, NDTV reported.
According to NDTV, Umar also said taxes on imported luxury cars would be raised, while local manufacturers would be helped by a cut in import duty on imported raw materials and on machinery imported into special economic zones.