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On Friday, the Resident Representative of the International Monetary Fund (IMF) in Pakistan refuted media claims suggesting that the lending organization is contemplating urging Pakistan to hike taxes on salaries and business earnings while also increasing the maximum threshold for the petroleum levy.

Contrary to circulating reports, the International Monetary Fund allegedly proposed a reduction in the number of tax slabs for both salaried individuals and the business class from seven to four, thereby heightening the tax burden on the middle and upper-middle income segments. Additionally, there were speculations about a potential increase in the maximum petroleum development levy.

Esther Perez Ruiz, the IMF’s Resident Representative in Pakistan, clarified that there are currently no such plans in motion, as conveyed in an email response to Reuters.

Following the approval of an International Monetary Fund loan program in July, Pakistan is presently governed by a caretaker government. The $3 billion Stand-by Arrangement (SBA) saw Pakistan receiving $1.2 billion from the IMF as the initial tranche in July.

The implementation of the IMF bailout program became crucial for Pakistan to avert a sovereign debt default, given the acute balance of payment crisis the country faced. Foreign exchange reserves had dwindled to a mere three weeks of controlled imports, accompanied by historically high inflation and an unprecedented currency devaluation.

As part of the bailout agreement, the International Monetary Fund compelled Pakistan to generate $1.34 billion in new taxation to fulfill fiscal adjustments. These measures contributed to an all-time high inflation rate of 38% year-on-year in May, surpassing all other Asian nations, and the inflation rate remains elevated, hovering above 30%.

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