Web Desk(July 27, 2018): Moody’s Investors Service says narrow tax base will remain the key challenge for the new government in Pakistan as previous governments achieved limited success on tax reforms.
The Election Commission (ECP) said Friday that with only 11 seats left to count, Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) enjoys a strong lead with 114 seats, and will be the biggest party in parliament. In a statement following the election results, Moody’s said it expects the PTI party to form a coalition government with smaller parties and independent candidates.“Pakistan’s heightened external vulnerability is the chief credit challenge in the near term for a new PTI-led coalition government. Possible policy options would include monetary and fiscal policy tightening, further exchange rate depreciation, and turning to the IMF for external financing,” it said.
The service noted that such implementation may face delay as the party has pledged to increase social spending, reduce taxes and lower energy costs. Moody’s said the party’s anti-corruption campaign has the “potential to address some long-standing institutional weaknesses”, but added measures to improve governance and tackle corruption will be “challenging for any new government to implement”.
The report said that in the current scenario, the country will need $10-15 billion loans from the IMF, whose attainment will be a difficult stage as the organization will implement the reforms agenda that includes privatization and addition in the tax net.