IMF chief urges Pakistan to tax the rich, protect the poor on sidelines of UNGA

Published September 21, 2023
Caretaker Prime Minister Anwaarul Haq Kakar meets IMF Managing Director Kristalina Georgieva at the UN on Wednesday. — X/KGeorgieva
Caretaker Prime Minister Anwaarul Haq Kakar meets IMF Managing Director Kristalina Georgieva at the UN on Wednesday. — X/KGeorgieva

International Monetary Fund (IMF) Managing Director Kristalina Georgieva has urged Pakistan to “collect more taxes from the wealthy and protect the poor people” amidst soaring inflation following the nation’s securing of a last-minute bailout in July.

Pakistan’s year-on-year inflation for the month of August leapt to 27.4pc, contracting household budgets. That same month, exorbitant electricity bills led to a protests across the country. The rattled government had initially promised some relief for the public, but later ruled it out citing Pakistan’s commitments with the IMF.

Speaking to Geo News after meeting caretaker Prime Minister Anwaarul Haq Kakar on the sidelines of the United Nations General Assembly on Wednesday, Georgieva said that she believed this was in line with what the people of Pakistan would like to see for the country.

“What we are asking in our programme is that please collect more taxes from the wealthy and please protect the poor people of Pakistan,” she said. “I do believe this is in line with what people in Pakistan would like to see for the country.”

Later in a post on X (formerly Twitter), the IMF chief said she had a good meeting with the Pakistani premier on the country’s economic prospects.

“We agreed on the vital need for strong policies to ensure stability, foster sustainable and inclusive growth, prioritise revenue collection, and protection for the most vulnerable in Pakistan,” Georgieva added.

Meanwhile, interim PM Kakar also posted on X about the meeting. He said he held a constructive dialogue with the Fund’s director that “emphasised extending our mutual commitment towards bolstering economic stability and growth in Pakistan”.

An official handout released by the Prime Minister’s Office said that Kakar expressed gratitude for the IMF’s approval of the $3 billion standby agreement to support Pakistan’s economy.

It said the premier briefed Georgieva on the various measures taken by the government to “stabilise and revive the country’s economy”.

“The prime minister affirmed that these initiatives aim to create a stable and conducive environment for sustainable economic growth and investment. Additionally, a strong focus had been placed on protecting the vulnerable segments of society,” the PMO statement said.

It further said that the IMF chief “appreciated Pakistan’s concerted efforts in implementing policies and reforms to revive the economy”. She assured that the IMF remained committed to continued engagement with Pakistan, the statement added.

On July 12, the Fund’s executive board had approved a $3 billion bailout programme for Pakistan which will immediately disburse about $1.2 billion to help the country.

On June 29, the IMF and Pakistan had reached a Standby Arrangement to ease the country’s financial crisis.

The IMF in a press release had said that the executive board approval allowed for an immediate disbursement of $1.2bn, with the rest to be phased over the programme’s duration — subject to two quarterly reviews.

IMF’s approval had come after Saudi Arabia and the United Arab Emirates (UAE) deposited $2 billion and $1 billion, respectively, with the State Bank of Pakistan, boosting the foreign exchange reserves.

The $3bn funding, spread over nine months, is higher than expected for Pakistan. Earlier, the country was awaiting the release of the remaining $2.5bn from a $6.5bn bailout package agreed in 2019, which had expired in June.

PM proposes measures for developing economies

Later, the prime minister addressed the Financing for Development Dialogue on the sidelines of the UNGA, where he proposed measures for developing struggling economies under the umbrella of the United Nations (UN).

He stated that an investment entity could be formed to “create and enlarge the capacity of developing countries to identify proposed SDG (sustainable development goal) related bankable projects”.

He proposed developing a template for national and international regulatory frameworks to incentivise private investment and to develop measures to “de-risk” SDG-related investment such as green bonds, landed finance, sovereign guarantees, insurance schemes, and first loss mechanisms.

The premier’s fourth proposal was to “negotiate a revised method for calculating risk with credit rating agencies to lower the cost of capital and connect all the stakeholders on one platform”.

Kakar added that these measures could create a professionally managed project unit which could “utilise the UN’s 130-plus country offices and specialised agencies to develop the capacity of developing countries, to prepare structure and implement SDG-oriented projects”.

The measures would “also help national governments to develop the regulatory and incentive structures to attract private investments and help accelerate the preparation of national projects”, the premier said.

Discussions with CEO of Rio Tinto Group

The prime minister also met the CEO of Rio Tinto Group, a global firm in mining and minerals, and discussed investment opportunities in Pakistan’s mining sector.

According to statement issued by the PMO, PM Kakar received Jakob Stausholm and encouraged the Rio Tinto Group to consider investing in Pakistan’s mineral and mining sector. He highlighted Pakistan’s “vast untapped mineral reserves, valued at over $6 trillion, which include substantial deposits of gold, copper, and rare earth metals”.

“The PM outlined Pakistan’s robust economic vision, emphasizing the government’s commitment to sustainable growth through efficiency enhancement, reduced business costs, regulatory improvements, increased productivity, and higher investments.

“He underscored the role of the Special Investment Facilitation Council (SIFC), which acts as a single-window platform, simplifying procedures and fostering an investor-friendly environment,” the statement said.

It added that the premier emphasised the significance of the mining sector as a priority for foreign direct investment and highlighted that the Government of Pakistan’s objective was to keep the people of Pakistan’s interest foremost while having a win-win cooperation with companies like Rio Tinto.

PM Kakar also extended an invitation to Rio Tinto Group’s CEO and their team to visit Pakistan and explore investment opportunities further.

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