ISLAMABAD: Cash-strapped In light of mounting concerns about a default, the International Monetary Fund has advised Pakistan to take efforts to ensure that only the needy receive subsidies and that wealthy earnings pay taxes.

IMF chief Kristalina Georgieva stated that Pakistan must take decisive action to avoid going into a "hazardous zone" where its debt needs to be restructured in an interview with the German public broadcaster Deutsche Welle on the fringes of the Munich Security Conference on Friday.

She said, the IMF was very clear that it wants to safeguard Pakistan's poor, as the Dawn newspaper said, and that it shouldn't be the case that the wealthy receive subsidies. The impoverished ought to gain from them, she claimed.
In order for Pakistan to function as a nation and avoid getting into a perilous situation where its debt needs to be restructured, she said, the country needs to take the necessary steps.

One-third of Pakistan's population was impacted by flash floods last year, which completely destroyed the country, she claimed. "We are emphasising two things, and I want to emphasise that. The first is tax receipts. Those who can and those who are earning well in the public or private sector should make an effort to boost the economy.

"Second, to distribute pressures more fairly by directing subsidies only to those who truly require them. The wealthy should not be receiving handouts, she argued.

Days after the two parties ended the ninth assessment of the $6.5 billion bailout package without reaching a staff-level understanding, the IMF chief made his comments. Nonetheless, all parties concurred on a number of measures that might yet be used to seal the deal.

Pakistan has already received financial aid from the IMF and is currently in talks with the organisation to renew its loan programme. Pakistan is in desperate need of money as it fights a searing economic crisis.

Around $1.1 billion would be released if the ninth evaluation of the programme could be agreed upon. Resuming the IMF plan will also open up new finance options for Pakistan.

The State Bank of Pakistan's foreign exchange holdings have decreased to just $3 billion, which is hardly enough to finance three weeks' worth of restricted imports.

Both parties have agreed to continue talking, and the IMF had stated that "virtual negotiations will continue in the coming days to finalise the implementation specifics" of the policies, including the tax measures, negotiated in Islamabad.

To put the tax reforms into effect and come to an agreement with the IMF, the government is working against the clock. Pakistan has until March 1 to follow all of the IMF's recommendations.

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