A currency exchange vendor adjusts Pakistani notes as he waits for customers on a street in Karachi. Repeated devaluations of the rupee have played havoc with the economy (RIZWAN TABASSUM)

Islamabad (AFP) – Pakistan Prime Minister Imran Khan’s government vowed to collect more taxes and make cuts in spending in a closely watched budget presented to parliament Tuesday, weeks after reaching a deal with the IMF for a $6 billion bailout.

Before a rowdy parliamentary session, the government announced plans to slash civil expenditure and freeze military spending while promising to substantially raise revenues to stem a yawning fiscal deficit, as it pledged to collect 5.5 trillion rupees ($36 billion) in taxes.

“We have slashed the civil budget by five percent while the military budget will remain the same,” said Hammad Azhar, Minister of State for Revenue, as he announced the details of the plan.

“The financial year 2019-2020 will be a year for economic stability. We will make some tough decisions and will try to save the poor public from the effects of those tough decisions,” he added.

Azhar went on to highlight a range of new taxes and increases in existing levies in the new budget, saying raising revenues was pivotal to stabilising the country’s economy.

“As long as we do not improve our tax system Pakistan cannot prosper,” said Azhar.

Pakistan has struggled for decades to collect taxes with estimates suggesting that only around one percent of the 200-million strong population filed a return in 2018.

Ahead of the budget presentation, Khan took to the country’s airways Monday for the second time in recent weeks to plead with Pakistanis to declare their assets in the latest scheme aimed at increasing tax revenues.

The budget session was dominated by a vocal opposition following a string of arrests of their leaders this week, with members of the Pakistan People’s Party and Pakistan Muslim League Nawaz chanting throughout the proceedings, drowning out Azhar. 

– Economic pain –

The presentation of Khan’s first budget comes just a day after the government released the latest round of bleak economic figures for the cash-strapped country, showing growth for the current fiscal year falling to 3.3 percent — well below the 6.2 percent target.

Discontent is simmering in Pakistan following repeated devaluations of the rupee, soaring inflation, and increasing utility costs. 

The economic pain follows months of failed efforts by Khan’s administration to stave off ballooning fiscal and balance of payments deficits, along with low tax yields and mounting debt. 

The agreement eked out with the IMF still needs final approval by the fund’s board, and it is widely believed the body was waiting to see details of the budget before giving the final sign-off.

Analysts have warned the IMF deal would likely come with myriad restrictions that could bridle Khan’s grand promises to build an Islamic welfare state, as the country is forced to tighten its purse strings.

Pakistan’s increasing economic woes also come as the country is facing possible sanctions from the Financial Action Task Force — a money-laundering monitor based in Paris — for failing to rein-in terror financing.

The organisation will decide soon whether to add Pakistan to a blacklist that would trigger automatic sanctions, further weakening an already-faltering economy.

To add to its troubles, the United States has warned it will be watching closely to ensure Pakistan does not use IMF money to repay debts to China, which has poured billions into the country for infrastructure projects under its Belt and Road Initiative.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.