Pakistan ready to unleash taxes worth Rs 200 billion to secure IMF funds

The Pakistan government has reportedly prepared two draft ordinances to impose Rs 200 billion in new taxes, days after it accepted International Monetary Fund’s (IMF) demands to resume a stalled loan programme, as per a media report.

The government is also mulling discontinuing the power sector subsidy and unleashing sales tax on raw materials for the export sector, especially textile industrialists, said a report by Pakistan-based English daily, Dawn. It further added that more hikes in electricity and gas tariffs are also on the agenda.

Hit by the worst economic crisis, Pakistan also hiked petrol and diesel prices by Rs 35 from Sunday.

Pakistan Finance Minister Ishaq Dar announced a Rs 35 increase in the prices of petrol and diesel. "The Pakistani rupee saw devaluation last week […] and now we are seeing an 11 per cent increase in the prices of petroleum products in the international market," he was quoted as saying by the Dawn.

This comes as Pakistan is facing the worst economic crisis as its reserves have dropped to a critical level of USD 3.7 billion and need urgent support to avoid default. The IMF is the only forum that can save the country.

Pakistan needs to complete the ninth review of a $7 billion IMF programme that would lead to a disbursement of $1.2 billion and also unlock inflows from friendly countries and other multilateral lenders. 

The IMF conditions include a market-based dollar-rupee exchange parity, a high-interest rate, and the imposition of a 17 per cent general sales tax on diesel and petrol within a week.

Former finance minister Miftah Ismail told Geo TV that the unlocked funding from the IMF would help head off the risk of Pakistan defaulting on its external obligations.

Pakistan's foreign exchange reserves hit a new nine-year low of $3.678 billion during the week ended on January 20.

(With PTI inputs)