The International Monetary Fund has asked Pakistan to stop providing incentives such as tax breaks and support to any new or existing special economic zones, so as not to reduce state treasury revenues, but such an approach will undermine Islamabad’s efforts to attract more Chinese industries to the country. .
A Bloomberg report said that the IMF wants to help provide a level playing field for investment, ensuring that the country’s tax base is not undermined.
Expected effects
This demand comes at a time when Prime Minister Shehbaz Sharif is trying to persuade Chinese companies to transfer more industries to Pakistan, adding new momentum to Belt and Road Initiative projects.
The country was planning to allow the construction of at least 9 special economic zones under the umbrella of the China-Pakistan Economic Corridor project, which are in various stages of development.
Nathan Porter, IMF mission chief for Pakistan, said in a press briefing last month that Pakistan has provided protection or concessions to sectors with low productivity, which is why it has been unable to achieve the sustainable growth rates achieved by many of its regional neighbors.
Immediate effect
It is expected – according to the agency – that the IMF’s request will have an immediate impact on the new industrial zone that the government intends to establish at the site of the steel factories in Karachi, the commercial capital of Pakistan in the south.
After securing a loan worth $7 billion from the International Monetary Fund, the Pakistani authorities are working to invite about 100 major Chinese industries to invest in the textile parks that the Ruyi Shandong Group will begin construction in the provinces of Sindh and Punjab.
The Pakistani government is trying to attract investors by offering special tax incentives, such as exemptions from paying taxes and customs, including exemption from customs duties on imported goods for companies established in such industrial zones.
China has built major infrastructure and energy projects in Pakistan to advance its flagship economic corridor project, which has helped the country but left it saddled with huge debt.
