The interim government of Pakistan has approved four development schemes with a combined cost of Rs 126 billion and a $300 million loan to improve tax compliance.
The loan, funded by the Asian Development Bank (ADB), comes at an interest rate of over 6% in dollar terms. This move has raised concerns as it is seen as unnecessary borrowing for an objective that primarily requires strong will and an efficient tax department.
The loan is aimed at reducing the tax gap to 20% of the potential tax collection, but critics argue that this can be achieved through increased efficiency rather than foreign loans. Similar concerns were raised when the previous government took a $400 million loan from the World Bank for reforms in the Federal Board of Revenue (FBR).
The loan agreement also includes goals to reduce the budget deficit, consolidate the single treasury account mechanism, and marginally improve foreign direct investment and domestic savings ratios, which are seen as objectives that do not necessitate foreign funding.
In addition to the loan, the Central Development Working Party (CDWP) approved four development projects, including the Thar Coal Rail Connectivity Project, the construction of New Gwadar International Airport, the improvement of Spera Ragha Road, and the repair of 600 passenger coaches and 1,200 bogies of Pakistan Railways.
The Thar Coal Rail Connectivity Project aims to connect Thar coal mines with Port Qasim through new rail links, providing bulk transportation facilities and reducing environmental pollution. It is seen as a significant step towards utilizing Thar coal for electricity production and reducing the import bill.
The New Gwadar International Airport project, part of the China-Pakistan Economic Corridor (CPEC), has faced delays but has now been approved with an increased cost of Rs60.2 billion. The improvement of Spera Ragha Road will widen and upgrade the existing single-lane road to a two-lane facility, improving connectivity between central cities in northern Balochistan and southern Punjab.