Pakistan’s tax-heavy budget likely to land IMF bailout, but stoke tensions

A Pakistani shopkeeper waits for customers in the main wholesale market in Karachi, Pakistan, Tuesday, June 11, 2024. (AP)
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Updated 14 June 2024
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Pakistan’s tax-heavy budget likely to land IMF bailout, but stoke tensions

  • Coalition government of PM Sharif does not have the luxury of a parliamentary majority to help it pass the budget smoothly
  • Pakistan has set challenging tax revenue target of $47 billion for the year starting July 1, near-40% jump from current year

ISLAMABAD: Pakistan’s plan to raise taxes in its 2024-25 budget and boost state revenues will help it win approval from the International Monetary Fund for a loan to stave off another economic meltdown, but could fuel public anger, a former finance official, experts and industrialists said. 
The South Asian country has set a challenging tax revenue target of 13 trillion rupees ($47 billion) for the year starting July 1, a near-40 percent jump from the current year, and a sharp drop in its fiscal deficit to 5.9 percent of GDP from 7.4 percent for the current year.
Pakistan had to reduce its fiscal deficit as part of negotiations with the IMF, with which it is discussing a loan of $6-8 billion, as it seeks to avert a debt default for an economy growing at the slowest pace in the region.
“The budget is enough to get an IMF Programme, as long as ... the budget is passed in the way it is presented,” former finance minister Miftah Ismail said. But he said the revenue targets will be challenging, as will the growth target of 3.6 percent.
“The two cannot happen simultaneously,” said Ismail, who as then-finance minister successfully negotiated the revival of Pakistan’s last Extended Fund Facility (EFF) program in 2022.
Outside analysts largely concur. 
Emerging Market Watch’s Metodi Tzanov believes the budget in its current form should be acceptable to the IMF.
“The government ticked almost all the right boxes to comply with IMF conditions, including withdrawal of tax exemptions, raising corporate tax for exporters, increasing the personal income tax rate, tightening the noose around non-filers, and hiking fuel tax,” he said.
But some said the IMF might baulk if it saw the tax target as unrealistic.
Finance Minister Muhammad Aurangzeb, who presented the budget for the first time, said he expected to seal a Staff-Level Agreement with the IMF in July.
The IMF did not immediately publicly comment on the budget and did not respond to questions sent by Reuters.
The big rise in the tax target is made up of a 48 percent increase in direct taxes and 35 percent hike in indirect taxes. Non-tax revenue, including petroleum levies, is seen increasing by a whopping 64 percent.
Taxes have notably been slapped on previously protected export-oriented sectors such as textiles, which consistently make up over half of Pakistan’s exports, and whose receipts keep a persistently high external account deficit in check.
The representative body for the sector, All Pakistan Textile Mills Association, called for a review of the budget, terming it “extremely regressive” and one that “threatens the collapse of the textile sector and its exports.”
It warned of “dire consequences for employment and external sector stability, as well as for overall economic and political stability and security.”
The Pakistan Business Council also called for budgetary measures to be reconsidered.
“The budget prioritizes securing another IMF EFF but lacks innovation for domestic economic growth,” said Musadaq Zulqarnain, director at the Pakistan Textile Council and chairman of Interloop, one of Pakistan’s largest textile manufacturers.
The coalition government of Prime Minister Shehbaz Sharif does not have the luxury of a parliamentary majority to help it pass the budget smoothly.
Sticking to the reform measures will require it to resist pushback from key economic sectors as well as a broader public already angry at the prospect of further price rises.
Sharif’s party had to convince its largest ally, the Pakistan Peoples Party (PPP), without whom it does not have a majority, to attend the budget session in parliamentary. PPP said it was not happy with some of the measures.
But analyst Yousaf Nazar, formerly of Citibank, believes the protestations are just political posturing. “(PPP) won’t rock the boat,” he said.
With few options in the short term to support Pakistan’s recent stability, an IMF program appears crucial.
Increasing the tax base in an economy where proper documentation is often lacking will require considerable time and effort. Pakistan’s undocumented parallel economy is huge and 44 percent of its nominal GDP does not contribute significantly toward direct tax revenue, according to the Tola Associates, a tax firm.
Traders and agriculturalists in particular, both politically influential, have resisted the government’s push to register themselves and document their sales.
“If the tax base is not going to increase, moving forward, the country’s tax revenues growth can drop further and it might end up as a dead weight loss to the economy,” Tola Associates said in a note.
“The real challenge is that of implementation,” said former central bank chief and Managing Director at Alvarez & Marsal Reza Baqir.
“For example, the budget targets an ambitious increase in the tax-to-GDP ratio. Many previous budgets have similarly targeted ambitious improvements. I would hope that the lessons from why those ambitions were not realized have been reflected in this budget.”


Pakistan interior minister orders ‘strict adherence’ to security plan for Muharram processions

Updated 16 July 2024
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Pakistan interior minister orders ‘strict adherence’ to security plan for Muharram processions

  • Militants have attacked Muharram processions in Pakistan in the past 
  • The South Asian nation has seen a surge in militancy in recent months 

ISLAMABAD: Interior Minister Mohsin Naqvi on Tuesday directed authorities to ensure security in all parts of the country and urged “strict adherence” to a special Muharram security plan put in place ahead of Ashura.

Ashura occurs annually on the tenth of Muharram and is marked worldwide by Shi’te Muslims as a day of mourning over the seventh-century battlefield death of Imam Hussein, the grandson of Prophet Muhammad (pbuh).

Militants have attacked Muharram processions in the past in Pakistan, which has seen a surge in militancy in recent months.

“The Minister directed the authorities concerned for ensuring security in all four provinces, Gilgit-Baltistan and Azad Kashmir and emphasized strict adherence to the special Muharram security plan,” state-run Radio Pakistan reported as Naqvi reviewed security arrangements at a main procession held in Islamabad on Tuesday, the 9th of Muharram.

“Naqvi said the federal government is extending every possible cooperation to provinces, Gilgit Baltistan and Azad Kashmir for maintenance of peace and law and order.”

While the Pakistani Taliban and separatist groups have been the major source of instability in Pakistan, sectarian militants who regard Shiites as non-Muslims also pose a significant security threat.

Large-scale sectarian attacks, which killed thousands in the 1980s and 1990s, are now less frequent in Pakistan but the rise of a local Daesh franchise has presented new challenges for the government. 


Pakistan-origin Shabana Mahmood is UK’s first Muslim woman Lord Chancellor

Updated 16 July 2024
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Pakistan-origin Shabana Mahmood is UK’s first Muslim woman Lord Chancellor

  • 43-year-old barrister has been a Member of Parliament for Birmingham Ladywood since 2010
  • Mahmood’s family roots are from Mirpur in Azad Kashmir, she graduated in 2002 from Oxford 

ISLAMABAD: Shabana Mahmood, a British-Pakistani MP from Birmingham, was sworn in this week as the United Kingdom’s new Lord Chancellor at a ceremony at the Royal Courts of Justice in London, becoming the first Muslim woman to head the Ministry of Justice as the Secretary of State for Justice. 

A member of the Labour Party, the 43-year-old barrister has been an MP for Birmingham Ladywood since 2010 and previously held various shadow junior ministerial and shadow cabinet positions under leaders Ed Miliband, Harriet Harman, and Keir Starmer between 2010 and 2024.

“I must say what an honor it is to take my own oath as Lord Chancellor today,” Mahmood, 43, said in a speech on Monday as she was sworn in. “There once was a little girl in Small Heath, one of the poorest areas of Birmingham who worked behind the till in her parents’ corner shop ...

“I hold this office in the very highest regard. I do so not just as a former barrister, but as the child of immigrants. My parents weren’t steeped in Magna Carta, Habeas Corpus and the Bill of Rights – as I would one day be. But they did have a strong sense, arriving here in the UK from rural Kashmir, that this country was different: That there are rules, some written and some not, that we abide by.”

Speaking about her inspirations, Mahmood mentioned Elwyn-Jones who served as Lord Chancellor for five years between 1974 and 1979.

“I certainly hope to emulate his longevity. It is said that he was the first Welsh speaking Lord Chancellor for centuries,” she said. “I wonder what he would’ve made of the first Lord Chancellor to speak Urdu.

“I’ve carried the weight of many identities in this career. It is a privilege, but also a burden … So, at the very least, I hope my appointment shows the next little girl in Small Heath, or wherever she may be that, in this country, even the oldest offices in the land are within reach of us all.”

Mahmood concluded by quoting Chapter 4 Verse 135 of the Qur’an: “O ye who believe! Stand out firmly for justice, as witnesses to Allah even as against yourselves, or your parents, or your kin and whether it be (against) rich or poor: For Allah can best protect both.”

“This is the fundamental articulation of how we, as Muslims, view justice in how we deal with the world,” Mahmood said. “It places justice above all else,” the justice secretary said. 

With roots in Mirpur, Azad Kashmir in Pakistan, Mahmood was born in 1980 in Birmingham and lived from 1981 to 1986 in Taif, Saudi Arabia, where her father was working as a civil engineer on desalination. After that, she was brought up in Birmingham where her mother worked in a corner grocery shop that the family had bought after returning to England. Her father became chair of the local Labour party and as a teenager, Mahmood helped him with campaigning in local elections.

Mahmood graduated in 2002 from Lincoln College, University of Oxford and went on to complete the Bar Vocational Course at the Inns of Court School of Law in 2003 after receiving a scholarship. As a barrister, her specialism is in professional indemnity.


Pakistan Navy conducts sea training of Saudi officers and cadets

Updated 16 July 2024
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Pakistan Navy conducts sea training of Saudi officers and cadets

  • 96 Royal Saudi Naval Forces trainees from King Fahad Naval Academy completed comprehensive sea training
  • Pakistan has close military ties with Saudi Arabia, providing extensive support, arms, training for Saudi army

KARACHI: The Pakistan Navy said on Tuesday it had conducted a sea training exercise for officers and cadets of the Royal Saudi Navy Forces, describing the collaboration as a testament to the two nations’ mutual commitment to enhancing military capabilities and strategic cooperation.

Pakistan maintains close military ties with Saudi Arabia, providing extensive support, arms, and training for the Saudi armed forces. Since the 1970s, Pakistani soldiers have been stationed in Saudi Arabia and Pakistan has also been providing training to Saudi soldiers, sailors and pilots.

“Pakistan and Saudi Arabia have long enjoyed robust collaboration in military training. Saudi Navy Officers and Cadets frequently undergo training at various PN training units, Ships & Naval Squadrons,” the Pakistan Navy said in a statement shared with media. 

The picture shared by the Pakistan Navy on July 16, 2024, shows officers and cadets of the Royal Saudi Naval Forces (RSNF) attending a sea training exercise. (Pakistan Navy)

“In a recent episode, 96 x Royal Saudi Naval Forces (RSNF) trainees from the King Fahad Naval Academy completed comprehensive sea training. They went through modules of tactics, weapon handling, combat training, navigation, naval operations and seamanship. A familiarization tour to Naval Aviation was also arranged.”

The statement added that the collaboration underscored the “multifaceted defense relations between Pakistan and Saudi Arabia.”

The picture shared by the Pakistan Navy on July 16, 2024, shows officers and cadets of the Royal Saudi Naval Forces (RSNF) attending a sea training exercise. (Pakistan Navy)

“It serves as a testament to the mutual commitment to enhance military capabilities and strategic cooperation, reflecting a shared vision for sustained military excellence and cooperation,” Pakistan Navy said. 


Four Pakistanis killed, 30 injured in ‘terrorist attack’ near mosque in Oman

Updated 16 July 2024
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Four Pakistanis killed, 30 injured in ‘terrorist attack’ near mosque in Oman

  • Attack took place at Shiite mosque in Wadi Al-Kabir, a district east of Omani capital city of Muscat
  • Omani police have not confirmed motive for rare attack in one of most stable countries in Middle East

ISLAMABAD: Pakistan’s foreign ministry said on Tuesday four Pakistanis had been killed in what it described as a “terrorist attack” near a mosque in Wadi Al-Kabir, a district east of the Omani capital of Muscat. 

The Royal Oman Police have confirmed the attack but given no motive nor said who was suspected of being behind the assault, a rare breach of security in one of the most stable countries in the Middle East.

“According to the latest information received from the Omani authorities, four Pakistanis were martyred as a result of gunshots in the dastardly terrorist attack on the Ali bin Abi Talib mosque in Wadi Kabeer area in Muscat,” the foreign ministry said. “Another thirty Pakistanis are under treatment in hospitals.”

Videos shared by the embassy in Oman showed Pakistan’s ambassador to Oman Imran Ali visiting the injured in hospital. 

“This is my message to the Pakistani community that in this emergency situation, please don’t go toward Wadi Al-Kabir, that area is cordoned off,” Ali said in a video message recorded at a hospital. “If anyone has injured relatives, kindly please don’t give up on your patience.”

He said he had visited up to four hospitals and the injured people he had met were in “relatively” stable condition. 

“People in their homes, please stay safe, and don’t go there [toward Wadi Al-Kabir] because our information is that the emergency situation is still ongoing,” the ambassador concluded.

A handout from the embassy said the “terrorist” attack by “unknown assailants” took place around 11pm on Monday night on the Imam Bargah Ali bin Abu Talib in Wadi Al-Kabir. Authorities evacuated people from the area following the attack and started an operation around 230am.

“Assailants have taken worshippers hostages while reportedly [there are] several casualties; authorities have cordoned off the area,” it added. “Hostage evacuation has started now. Military units have reached.”

The Pakistani embassy’s Facebook page said emergency had been imposed at the Khulla Hospital, Nahida Hospital and Royal Hospital, which Ambassador Ali had visited. 

The attack comes during the Islamic month of Muharram when Shiite Muslims commemorate the seventh-century battlefield martyrdom of Imam Hussein, the grandson of Prophet Muhammad (pbuh).


10 soldiers killed in two separate militant attacks in northwest Pakistan — army 

Updated 16 July 2024
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10 soldiers killed in two separate militant attacks in northwest Pakistan — army 

  • Eight soldiers killed while blocking militants from entering military cantonment in Bannu on Monday
  • Two soldiers, five civilians killed in militant attack on Rural Health Center in Dera Ismail Khan on Tuesday

ISLAMABAD: Ten soldiers and five civilians were killed in two separate attacks in the country’s northwestern Khyber Pakhtunkhwa province on Monday and Tuesday, the army’s media wing said, blaming insurgents based in Afghanistan for one of the assaults.

Pakistan has witnessed a spike in militant attacks in recent years, with many of them taking place in the Khyber Pakhtunkhwa province which borders Afghanistan. Islamabad blames the surge mainly on militants from the Pakistani Taliban, or TTP, and other groups that it says operate out of Afghanistan.

Kabul denies that it allows its territory to be used by insurgents and says Pakistan’s security woes are a domestic issue.

In the first attack, the army said a group of ten militants had tried to enter a cantonment in Bannu in the early hours of July 15, Monday. 

“The attempt to enter the cantonment was effectively thwarted by the security forces personnel, which forced the terrorists to ram an explosive laden vehicle into perimeter wall of the cantonment,” the statement said.

Eight soldiers were killed in the ensuing blast which also led to the collapse of a portion of the outer wall and damaged nearby infrastructure.

“In the ensuing operation, own troops effectively engaged the terrorists as a result of which all ten terrorists were sent to hell,” the army said. “This timely and effective response by the security forces prevented major catastrophe, saving precious innocent lives.”

The military said the attack had been carried out by the Hafiz Gul Bahadur group, a TTP faction, saying it operated from Afghanistan and had used Afghan soil to ‘orchestrate’ attacks inside Pakistan in the past as well. 

“Pakistan has consistently raised its concerns with Interim Afghan Government, asking them to deny persistent use of Afghan soil by the terrorists and take effective action against such elements,” the statement said. 

“Pakistan Armed Forces will keep defending the motherland and its people against this menace of terrorism and will take all necessary measures as deemed appropriate against these threats emanating from Afghanistan.”

In a second attack early on Tuesday morning, militants opened fire at staff at a Rural Health Center in KP’s Dera Ismail Khan district, killing two women health workers, two children and a guard. 

“Security Forces in vicinity were immediately mobilized for clearance operation in RHC and in ensuing fire exchange, own troops effectively engaged the terrorists as a result of which three terrorists were sent to hell,” the army said. 

“However, during intense fire exchange, Naib Subedar Muhammad Farooq (age 44 years, resident of District Narowal) and Sepoy Muhammad Javed Iqbal (age 23 years, resident of District Khanewal) paid the ultimate sacrifice and embraced Shahadat [martyrdom].”