In a significant move to address its fiscal crisis, Pakistan announced on September 29 that it would abolish approximately 150,000 government posts and close six ministries as part of a series of reforms agreed upon with the International Monetary Fund (IMF) under a $7 billion loan agreement. The announcement comes as part of Pakistan’s commitment to cut administrative expenditures and enhance the overall efficiency of the government amid a dire economic situation.

The IMF, on September 26, approved the assistance package, releasing over $1 billion as the first tranche after Pakistan assured the fund that it would undertake critical reforms. These reforms include increasing the tax-to-GDP ratio, extending taxation to non-traditional sectors like agriculture and real estate, limiting subsidies, and transferring some fiscal responsibilities to the provinces. These measures aim to stabilize Pakistan's economy, which has struggled under high inflation and dwindling foreign exchange reserves.

Finance Minister Muhammad Aurangzeb addressed the media upon his return from the United States, where he discussed the finalization of the IMF program, emphasizing that this would be the last such arrangement for Pakistan. He stated, "We need to implement our policies to prove that it will be the last programme," underscoring the urgency of formalizing the economy to align with the G20 requirements.

As part of the government's efforts to streamline operations, Aurangzeb announced that the decision to close six ministries is set to be implemented alongside the merging of two others. He highlighted that the initiative aims to optimize government resources and reduce wasteful expenditures. The significant reduction of 150,000 posts across various ministries is a substantial step towards achieving a leaner government structure.

The Finance Minister elaborated on the measures taken to boost tax revenues, noting that Pakistan has seen a substantial increase in taxpayer registrations. Last year, around 300,000 new taxpayers emerged, and this year, an impressive 732,000 have already registered, effectively doubling the total number of taxpayers in the country from 1.6 million to 3.2 million. This move is part of a broader strategy to increase government revenue and reduce dependency on foreign loans.

Furthermore, Aurangzeb announced a significant policy change: the non-filers category will be abolished, meaning those who do not pay taxes will no longer be permitted to purchase property or vehicles. This policy aims to compel citizens to fulfill their tax obligations, thereby enhancing government revenue streams.

The Minister also expressed optimism regarding the economic direction of Pakistan, reporting that the country’s foreign exchange reserves have reached their highest levels. He noted substantial growth in both national and IT exports, indicating a resurgence in investor confidence in the economy.

Aurangzeb pointed out that the government had successfully reduced the policy rate by 4.5% since assuming power, indicating a positive outlook for the exchange rate and overall economic stability. He claimed that the government’s interventions have led to a decline in inflation, which has recently dropped to single digits.

Despite these optimistic claims, skepticism remains regarding Pakistan's long-term economic viability. Many analysts express doubts about the sustainability of such reforms, given that the country has previously secured numerous loans from the IMF without resolving underlying economic issues.

The government’s recent initiatives are a critical response to the challenges faced by Pakistan, and the successful implementation of these policies will be essential in determining the future of the country's economy and its relationship with the IMF.

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