New Delhi, March 15 (IANS) Negotiations between Pakistan and the International Monetary Fund (IMF) over the release of a $1 billion tranche have reportedly stalled again due to the country’s weak tax collection and doubts about the credibility of the current budget, reports said.

The IMF has once more pointed its finger at Pakistan’s tax machinery, arguing that revenue targets are unlikely to be achieved, according to an article in the Karachi-based Business Recorder newspaper.

“The concern is legitimate. Pakistan’s tax system has long underperformed. The country’s tax-to-GDP ratio remains stuck around 9–10 per cent, one of the lowest among comparable emerging economies. The tax net is narrow, the informal economy is large, and compliance remains weak,” the article stated.

For decades, every IMF programme has demanded that Pakistan improve tax administration, broaden the tax base, and increase revenue targets. Despite these repeated efforts, results have been modest, and the reasons for this are well known.

The formal sector continues to bear most of the tax burden while large segments of wealth, particularly retail, agriculture and others, remain lightly taxed or outside the system.

The informal economy, often estimated at 40 per cent of GDP, remains largely untouched.

Pakistan’s fiscal problem is not only that the government collects too little revenue. It is equally true that massive financial leakages continue across the public sector without decisive reform, the article pointed out.

The most glaring example is the persistent drain created by loss-making public sector enterprises. Institutions such as Pakistan International Airlines and Pakistan Steel Mills have accumulated staggering losses over the years. Their liabilities are ultimately absorbed by the national exchequer through subsidies, guarantees, and debt restructuring.

These enterprises survive largely because governments hesitate to confront the political costs of restructuring or privatisation. Yet their financial losses run into hundreds of billions of rupees, quietly draining public resources every year.

Strangely, while IMF programmes frequently emphasise revenue targets with great precision, the urgency surrounding public sector enterprise reform often appears less forceful. Privatisation plans move slowly, restructuring deadlines slip, and fiscal support to failing entities continues, the article lamented.

An even larger financial sinkhole lies in Pakistan’s energy sector. The country’s infamous circular debt—a complex chain of unpaid obligations within the electricity system—has grown to trillions of rupees.

The IMF has often insisted on raising electricity tariffs to reduce the financial gap. But higher tariffs alone cannot fix a system plagued by inefficiency and poor governance. Without deeper restructuring of power distribution companies and improved management, the circular debt simply regenerates.

Another aspect that rarely receives sustained scrutiny is extravagant or non-productive public expenditure. Federal and provincial budgets continue to carry significant administrative overheads, subsidies that are poorly targeted, and politically-driven development schemes with limited economic value. Fiscal discipline cannot rely solely on extracting more revenue. It must also involve serious scrutiny of how public money is spent, the article added.

–IANS

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