The International Monetary Fund (IMF) has expressed apprehensions that pressure on the government could result in incentives and exemptions to powerful vested interest groups which may hamper tax reform initiatives and policy reforms of the Federal Board of Revenue (FBR).
The IMF report on the seventh and eighth reviews of the extended arrangement under the Extended Fund Facility issued on Friday, highlighted the slippages in policy implementation. The apprehensions of the IMF have been mentioned in the “Risk Assessment Matrix” of the IMF report.
Political resistance and hesitation to delivering on structural reforms, as well as weak institutional capacity and powerful vested interests, could undermine effective reform implementation and lessen the prospects for durable adjustment and sustainable and inclusive growth.
The weaker fiscal discipline could compromise the quality and durability of fiscal adjustment and expose debt sustainability risks. The unfinished structural reform agenda would reduce growth prospects, preserve overreliance on the public sector and large informal economy, and leave unaddressed contingent liabilities, the report added.
The IMF has suggested Pakistan to implement strong policies and strengthen institutions (including anti-corruption agencies) as a foundation of strong and sustainable growth.
The report stated that the government should resist pressures to weaken fiscal discipline and preserve fiscal sustainability, build external buffers, foster more inclusive growth through scaling up targeted social assistance and improve external competitiveness and reduce red tape to reduce the costs of doing business.