Following agreements between the government and the IMF, extra taxes totalling Rs170 billion will be implemented on February 15 rather than March 1. The reason for this is that, while the IMF has set March 1 as the deadline for implementing the measures required to provide a $1.20 billion loan, the government’s foreign exchange reserves have reached the final limit, so it is critical to paving the way for obtaining the loan in the shortest possible period by fulfilling the conditions as soon as possible. TGovernment sources have also revealed that at the start of the negotiations, there was concern that the IMF would demand Rs400 billion in tax measures, but at the end of the policy-level talks, the parties agreed on tax and non-tax measures and agreed to collect Rs1.40 trillion in the next four and a half months. The relief provided to Pakistan demonstrates that the country’s current economic strategists were successful in convincing IMF members of their viewpoint by offering strong arguments and data.
One probable explanation for the IMF’s shift in attitude is the government team’s effectiveness in raising public awareness of the flood devastation. However, the vast mass of the population is still suffering from long-standing severe conditions such as inflation and unemployment. It is also tough for citizens to shoulder the weight of Rs170 billion in increased taxes. However, the government wants to make sure that the cost of these additional taxes does not fall directly on the shoulders of the average citizen. To that end, a decision was reached not to raise the price of power for people who spend up to three hundred units of electricity in this context. The government’s negotiating team has convinced the IMF after a great struggle, otherwise, it had insisted that the exemption be granted only to those consuming 100 units of electricity per month. But according to other decisions, the government will have to stop the Kissan package along with the electricity subsidy in the export sector from March 1. The general sales tax would be raised from 17 to 18 per cent under the tax measures agreed upon by the FBR. The petroleum development levy will not be raised further, but the diesel profile will be raised by ten rupees. Other tax measures include a rise in the withholding tax rate, a regulatory tariff on the import of luxury and non-essential products, and an increase in the federal excise duty rate on tobacco.
