ISLAMABAD: Pakistan will be able to collect additional taxes worth Rs170 billion after President Dr. Arif Alvi on Thursday approved the Finance Supplementary Bill 2023, fulfilling a major prior condition for the signing of a staff-level-agreement with the International Monetary Fund (IMF) to revive a stalled $7 billion bailout program.
The IMF had asked Pakistan to raise an additional Rs170 billion through tax revenue, with the bulk of tax measures worth Rs115 billion implemented from February 14 through Statutory Regulatory Orders (SROs). Now, with the president’s formal assent to the new finance bill, or mini budget, the remaining Rs55 billion tax measures will also come into effect.
Pakistan has been struggling to reach a deal with the global lender to receive the $1.1 billion tranche of a package signed in 2019. Discussions in Islamabad from January 31 to February 9 this year ended without the signing of a staff-level agreement but virtual discussions are continuing and the IMF has continued to push 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.
“President Dr. Arif Alvi has approved the Finance (Supplementary) Bill 2023. The approval was given under Article 75 of the Constitution,” the President’s House announced in a Twitter post.
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.
Pakistan is in dire need of funds as it battles a worsening economic crisis, with foreign exchange reserves falling to around $3 billion, barely enough to cover three weeks of controlled imports. An agreement with the IMF would not only release an over $1.1 billion loan but also unlock other avenues of funding for Pakistan.
On Wednesday, Commerce minister Syed Naveed Qamar said during a visit to Washington he was hopeful for the resumption of the loan program “as early as this week.”