IMF advises govt to stop tax benefits for agriculture and textile sectors

The IMF has urged Pakistan to immediately end tax exemptions, special treatment, and other benefits for the textile and agriculture industries, stating that these measures have hindered the nation’s growth potential for years.

The textile and agriculture industries are inefficient and a financial drain on the public coffers, which is why the International Monetary Fund (IMF) has called on Pakistan to remove tax breaks and subsidies for them.

The IMF underlined in its most recent report that Pakistan must abandon outdated economic methods in order to avoid experiencing repeated economic crises.

The research also found that certain industries continue to be uncompetitive in spite of subsidies, which impedes innovation and economic growth.

Pakistan falls short of comparable countries according to the IMF, with over 40.5% of the population living in poverty.

Additionally, the nation finds it difficult to expand its export base beyond textiles and agriculture, which limits its involvement in international value chains.

As of May 2024, the textile industry accounted for 70% of concessional loans, indicating the largest tax gap.

For the purpose of promoting technical innovation and competitiveness, the IMF suggested lowering trade barriers and simplifying trade regulations.

The research warned that we should abandon trade policies that protect inefficient industries and provide fiscal incentives in order to reduce resource misallocation and promote sustainable growth.