The International Monetary Fund (IMF) urged the Pakistan government to take an aggressive approach to curb inflation and hike interest rates during a recently concluded staff-level visit. The IMF also questioned the Shehbaz Sharif-led government as to what steps it has taken on its defense budget and whether there has been an agreement to cut defense spending.

The IMF told the Pakistani delegation that if the government could not cut defense spending, they should raise the GST rate on consumer goods to 25% for additional revenue. People familiar with the development told CNN-News18 that the government is set to impose a 25% general sales tax (GST) on dozens of consumer goods to meet the IMF demand as it has failed to cut defense spending.

Pakistan's foreign exchange reserves, facing a cash crisis, have remained less than three billion dollars. He is in great need of financial help and a relief package from the IMF at this time to avoid financial collapse. The ninth review is currently pending from the IMF and upon its successful completion, $1.1 billion will be released to Pakistan as the next tranche.

People in Pakistan's Finance Ministry told CNN-News18 that the IMF is asking Pakistan to liberalize the exchange rate 'completely'. The gray and black markets have troubled the IMF and remain a thorny issue between the two sides.

People concerned said that the Government of Pakistan has taken measures like imposition of Statutory Regulatory Order (SRO). The government has acquired powers to impose such orders under the recently approved Supplementary Finance Act, but these are not considered a good form of taxation.