Prime Minister Shahbaz Sharif commended the government’s economic team for its tireless efforts to not only secure the 1.3 billion dollar 28-month new arrangement under the Resilience and Sustainability Facility (RSF), but for successfully reaching the Staff-Level Agreement (SLA) on the First Review for the 37-month Extended Arrangement under the Extended Fund Facility (EFF) during a previously scheduled cabinet meeting.

The cabinet meeting took place on 26 March and coincided with the issuing of a press release by the IMF on its website dated 25 March 2025, early 26 March in Pakistan.

Shahbaz Sharif then proceeded to extol the “collective sacrifice of the nation” while dismissing earlier claims by the opposition that a mini-budget would be required to reach the SLA.

However, what is disturbing is that collective sacrifice has largely been exacted from the lower to middle income groups due to three prevailing elements.

First, the heavy reliance of the country’s tax system on indirect taxes whose incidence on the poor is greater than on the rich, continues. It is estimated at nearly 85 percent of all tax revenue – 60 percent from indirect taxes as per the budget documents and 75 to 80 percent of direct taxes are sourced to withholding taxes levied in the sales tax mode, an indirect tax – a practice that persists to this day in spite of a recommendation by the Auditor General of Pakistan to the Federal Board of Revenue to desist from it.

Second, rising reliance on petroleum levy as a revenue source, an indirect tax placed under other taxes (a rather obvious attempt not to share the proceeds with provinces). This is also largely paid for by the lower to middle income........

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