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On Sept 5, the IMF agreed to extend a three-year $6.7 billion loan, making an initial disbursement of $540 million available to the authorities.—File Photo
On Sept 5, the IMF agreed to extend a three-year $6.7 billion loan, making an initial disbursement of $540 million available to the authorities.—File Photo

ISLAMABAD: The International Monetary Fund warned Pakistan Thursday that economic growth could be worse than expected next year due to strict austerity measures built into a $6.7 billion rescue loan.

Pakistan is in the grip of its worst energy crisis in modern history which causes power outages up to 20 hours in parts of the country and has hammered industrial output.

During the last five years, GDP has averaged only three percent, far short of the seven percent considered necessary to lift the country out of poverty and fully absorb the growing labour force.

Central bank reserves have fallen to $6 billion, down from $14.78 billion in fiscal year 2010-11 and are enough only to cover imports for one and a half months.

On September 5, the IMF agreed to extend Pakistan a three-year $6.7 billion loan, making an initial disbursement of $540 million available to the authorities.

The loan is aimed at reducing Pakistan's fiscal deficit – which neared nine percent of gross domestic product last year -- to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.

But future disbursements are dependent on the completion of tough economic reforms measured at quarterly reviews.

In Pakistan, a country of 180 million people, only around 250,000 people pay income tax and agriculture, which still accounts for 50 percent of the economy, is largely exempt.

To repair the economy, Prime Minister Nawaz Sharif has promised to widen the tax base, improve the image of paying taxes and limit corruption.

The IMF said his budget for the fiscal year to June 30, 2014 “represents an important initial step” but cautioned that “a more efficient and equitable tax system is needed”.

Austerity will also push down growth. Before Thursday, the IMF predicted growth of 3.5 percent of GDP but has revised that down to 2.5 percent if the necessary reforms are implemented.

In announcing the loan, the IMF said Pakistan's adherence to the programme would likely encourage financial support from other donors.

The Asian Development Bank has this week announced that it will invest $245 million in Pakistan's power distribution systems.—AFP

Reuters adds: “Economic performance in Pakistan has been substandard in recent years,” the IMF said. “Executive directors noted that Pakistan's economic vulnerabilities and crisis risks are high, with subpar growth and unsustainable fiscal and balance of payments positions.”

Comments (17) Closed

rahim Sep 12, 2013 09:11pm

this is not new news same story year after year same sorry state of affairs .. country's administration is useless at every level and aspect.

Alli Husnain Sep 12, 2013 10:47pm

Don't we think that taxation on agriculture will erupt new un-seen crisis and add fuel to the backwardness of the sector.........!

imran ahmed Sep 12, 2013 10:58pm

pakistan is under economic mismanagement. Only the bureaucrats of Pakistan are to blame. they are totally inefficient,corrupt and looters of people's money.

Alli Husnain Sep 12, 2013 11:27pm

Don't we think that taxation on agriculture will erupt new un-seen crisis and add fuel to the backwardness of the sector...................! The Farmers already are in poor condition, they can't even bear a single penny of a tax..........................! But if we consider the other side of the picture, it shows that we have to meet the economic crisis in all circumstances and lave tax on agriculture will ease to coup with the situation....................! so, lets start the tax from the giants, of course, feudal lord and big jagir'dars................! The tax should be imposed who possessed 25 acres of land, the should be the at least benchmark for the imposition of the tax................... In this way the poor farmers will continue without any burden and feudal will also of course continue without any burden....! Proper planning in taxation can ensue fruitful burden-free results...

Syed Ahmed Sep 13, 2013 12:20am

This is pretty obvious - one is not given a loan just for nothing.

imran Sep 13, 2013 05:19am

Any person with half of a brain could have told us the same thing. Thanks IMF for stating the obvious.

Talha Sep 13, 2013 05:23am

Agriculture is not exempt from tax but is taxed at provincial level in the shape of farm income tax. Just like most people evade federal income tax, the farm tax is largely evaded. Exemption has actually been provided for capital gains (specially on the sale of real estate) as well as for gifts and transfer of inheritance, which are revenue areas in countries like the US. Capital gain on stock is however taxable at nominal rate.

Nazim Sep 13, 2013 06:04am

Open eyes and mind before it is too late to avert chaos. Tax agriculture income like any other income. Ban sale, purchase and use of air conditioners in the country. Learn to live on fans as it was common few years back. Energy so saved be diverted to industry.

Anees Sep 13, 2013 07:37am

If it is worse, it is NOT growth.

Asif Ahmed Khan Sep 13, 2013 09:44am

with agriculture, i guess illegal taxes collected from Encroachers should be made legal and monitored.

Saleem A Chaudhry Sep 13, 2013 10:34am

Pakistan will do bankruptcy because of foreigner interest loans..... Start new CHANGE

Bhavani Pani Sep 13, 2013 03:12pm

Wish Pakistan could follow the China model. Impassionately privatise all Public Sector organisations. With the money raised- pay of foreign loans. Open up trade and FDI regime. Keep politics out of economics for the next 10-20 years. Easily said than done in a democracy as India is finding out - very painfully. The Green Brigade, Human right activists and political activists (read opportunists) will not let e the all this happen easily! You have the added problem of law and order and fundamentalism to handle! Time for tough socio-economic decisions!! An yes- Education and entrepreneurship development among youth needs top attention. Another great lesson from China.

Adeel Sep 13, 2013 04:25pm

How about Nawaz Sharif paying his income taxes honestly. That would be like showing some real intent in solving the country's problems.

Muhammad atif Sep 13, 2013 06:45pm

great effort by imf to improve pakistan poverty level

pathanoo Sep 13, 2013 08:20pm

Due to corrupt, power hungry politicians no one is minding the country. The party that comes in power wants to make sure that it gets it's share of the loot before it is thrown out. In an environment like that no economic activity can flourish. No sane and sensible policies can be made, leave aside implemented. Pakistan needs to wean itself off the IMF loans or the writing is on the wall. COMPLETE DISSOLUTION OF THE COUNTRY.

khan Sep 14, 2013 12:52am

yeah qoum tabah aur barbaad hou jaa aiy gee per sudhray gi nahi... aur acchay aur qumzoor loug issi tarhan khamoosh bhaitay rahain gay aur aik doosaray kay marnay kaa intizar kartay rahain gay...

Rehan Khan Sep 14, 2013 03:27pm

Please impose emergency to fight with socioeconomic crisis. take few measures immediately as follows: 1. Exercise impartiality in society and ensure justice at all level. 2. Make autonomus body to appoint Ahtisab bureau head, CJ and COAS. 3. Focus on financial control and Computerise income monitering of each individual, and corporate sector and monitor each banking transaction and flow of money at certain thresh hold.. 4. Make a law for fake degrees to be punished and sentenced for several years. 5. Investigate the Income and wealth of each beaurocrate, politician, Journalist, and diplomate starting from last fifty years and recover and confiscate single penny if found guilty. 6. Resolve the power issue in shortest time which is possible if separated with politics. 7. Impose emergency for education and set atlest graduation as minimum education for each individual resident of big cities. 8. Eradicate corruption from beaucracy and investigate all previous and new contracts given for infrastructure development throughout the country. 9. Monitor price control for all goods and services necessity of common man. all above all must to do things if we want to be a developing nation and stand out amoung our neighbouring countries. wish you all good luck