ISLAMABAD: Pakistani parliament with majority vote on Monday approved the Finance Supplementary Bill 2023 for the collection of additional taxes of Rs170 billion, taking the cash-strapped nation one step closer to astaff-level-agreement with the International Monetary Fund (IMF) to revive a stalled $6.5 billion bailout program.
Pakistan has been struggling to reach a deal with the global lender to receive a tranche of $1.1 billion of a package signed in 2019 to stave off an economic meltdown.
Pakistan held discussions with the IMF from January 31 to February 9 to revive the deal, but the lender’s delegation departed Islamabad without signing a staff-lev agreement. The lender agreed to continue virtual discussions while calling on Islamabad to fulfil more ‘prior actions,’ including the collection of additional revenues to revive the deal.
The government has already jacked up the prices of petroleum products, natural gas and electricity to meet the global lender’s defined prior actions for the deal.
“We have to impose Rs170 billion taxes due to losses of power sector,” Finance Minister Senator Ishaq Dar said while speaking on the floor of the National Assembly.
“It is important for our economic stability and to bring fiscal discipline that we have to take this difficult decision,” he said, adding that Prime Minister Shehbaz Sharif would soon present a detailed austerity program in the house to cut government expenditures.
“Virtual discussions with the IMF are ongoing and talks will also take place today,” State Minister for Finance Aisha Ghaus Pasha told journalists.
“Matters with the IMF are progressing in a positive direction ... A further delay in the agreement is unlikely.”
Through the new legislation, the government has increased General Sales Tax (GST) on all luxury items from 17 to 25 percent, imposed a fixed tax on all business and first class air travel ranging from Rs75,000 to Rs250,000 and a 10 percent withholding tax on marriage halls, as well as raised federal excise duty on cement from Rs1.5 to Rs2 per kilogram.
“We hope these measures will help steer the country out of the quagmire,” Dar told parliament. “It’s never too late. We should try hard [to overcome the economic challenges].”
The legislation will be effective as soon as the president gives his approval.