IMF puts new demands for Pakistan: ‘Focus on anti-money laundering measures’

A series of technical-level discussions between Pakistan and the International Monetary Fund (IMF) are being held wherein the international lender has pressed for stringent measures against anti-money laundering and suspicious transactions.

The officials from the State Bank and Federal Board of Revenue (FBR) are actively engaged in briefings with the IMF mission, sharing comprehensive reports on cyber-related crimes up to September 2023. The IMF has urged the formulation of clear policies to combat tax crimes and suspicious transactions.

Ahead of the upcoming budget, there is a notable emphasis on imposing tougher penalties against dubious transactions.

The IMF is recommending the strict implementation of laws, including blocking accounts, severe punishments, and close monitoring of those involved, as outlined in the FBR briefing.

FBR has also disclosed its tax collection plan for the next eight months, aiming to collect Rs6,667 billion from November to June 2024. The central bank said Rs2,748 billion were collected in the first four months, officials acknowledge that it falls short of the annual target of 9,415 billion.

The tax collection plan encompassed income, sales tax, customs, and excise duty from various sectors, with discussions on pending tax cases and potential recovery mechanisms underway.

The FBR has hinted at including retailers in the tax net starting January, assuring the IMF of meeting the tax target for the current financial year.

The caretaker government has also pledged full implementation of the program, signaling a commitment to fiscal responsibility and cooperation with international financial institutions.

On June 29, this year, an International Monetary Fund (IMF) staff team led by Mr. Nathan Porter held in-person and virtual meetings with the Pakistani Authorities to discuss a new financing engagement for Pakistan under an IMF Stand-by Arrangement (SBA).

Porter issued the following statement: “I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR2,250 million (about $3 billion or 111 percent of Pakistan’s IMF quota). The new SBA builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported program which expires end-June. This agreement is subject to approval by the IMF’s Executive Board, which is expected to consider this request by mid-July.

“Since the completion of the combined seventh and eight reviews under the 2019 Extended Fund Facility (EFF) in August 2022, the economy has faced several external shocks such as the catastrophic floods in 2022 that impacted the lives of millions of Pakistanis and an international commodity price spike in the wake of Russia’s war in Ukraine. As a result of these shocks as well as some policy missteps—including shortages from constraints on the functioning of the FX market—economic growth has stalled. Inflation, including for essential items, is very high. Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute, with further buildup of arrears (circular debt) and frequent loadshedding.

“Given these challenges, the new SBA would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead. The authorities have already taken a series of important actions ahead of the new program.