A petrol station employee updates the latest fuel prices on a board in Karachi, February 16, 2023, after the government hiked the prices of petroleum products. | Photo credit: AFP
The National Assembly of Pakistan on Tuesday, February 21, 2023 unanimously passed a money bill aimed at increasing tax revenue to meet these demands. International Monetary Fund (IMF) to get USD 1.1 billion loan facility to avoid economic downturn.
The Finance (Supplementary) Bill 2023 or ‘Money Budget’ was passed in the Lower House of Parliament days after the International Monetary Fund (IMF) pushed for it. A cash-strapped country to take drastic measures to avoid getting into a “dangerous spot” where its debt needs to be restructured.
IMF chief Kristalina Georgieva said in Germany on Friday that Pakistan must take steps to ensure that its high earners pay taxes and only the poor receive subsidies if it wants to function as a country. Is.
In the bill, the sales tax on luxury items has been increased from 17 to 25 percent. General Sales Tax has been increased from 17% to 18%.
Geo News reported that people will also have to pay more for business class air travel, wedding halls, mobile phones and glasses.
“The prime minister will unveil (more) austerity measures in the next few days,” Finance Minister Ishaq Dar said as the bill was passed with minor amendments, adding: ” We have to make tough decisions.”
The government had tabled the bill last week with the aim of passing it by the weekend, but failed to do so after facing criticism from allies.
FM blames PTI government for crisis
In his speech, Finance Minister Dar blamed mismanagement in the power sector and poor economic policies of the previous Pakistan Tehreek-e-Insaf (PTI) government for the current financial crisis.
The bill will help raise the Rs 170 billion set by the IMF by the end of June for the current fiscal year.
The new taxes along with other measures by the government will further burden the public with inflation which is already high.
However, this brings Pakistan closer to receiving a USD 1.1 billion tranche from the IMF to shore up its dwindling foreign exchange reserves, which has been drastically reduced to just over USD 3 billion.
Pakistan is eager to open the next tranche of a US$6.5 billion credit facility with the IMF but is struggling to meet the stringent conditions set by the Washington-headquartered financial institution.
The IMF is demanding that Pakistan boost its pathetically low tax base, end exemptions for the export sector, and artificially lower energy prices aimed at helping poor families.
“People who are making good money in the public or private sectors need to contribute to the economy,” IMF managing director Kristalina Georgieva told German state broadcaster Deutsche Welle on Friday.
“It should not be the rich who benefit from the subsidies, it should be the poor who benefit from them,” he said.
Pakistan, which is in desperate need of funds as it battles a severe economic crisis, has received financial assistance from the IMF in the past and is currently in talks with the organization to restart its lending program. .
Earlier, the IMF said in a statement that the two sides have agreed to remain engaged and virtual talks will continue in the coming days to finalize the implementation details of the policies, including the tax measures discussed in Islamabad. will remain
The government is racing against time to implement tax measures and reach an agreement with the IMF. The IMF has given Pakistan a deadline of March 1 to implement all measures.