IMF presses Pakistan to foist more taxes in second round of talks

ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs600-800 billion in additional taxes in the second round of talks to revive $7 billion Extended Fund Facility (EFF) stalled for months, ARY News reported on Wednesday, citing sources.

According to details, the Federal Revenue Board held a second round of technical talks with IMF mission, led by Mission Chief to Pakistan Nathan Porter, on the ninth review of a $7 billion loan programme.

Pakistan had secured a $6 billion IMF bailout in 2019, which was topped up with another $1 billion last year, but the lender then stalled disbursements in November due to Pakistan’s failure to make more progress on fiscal consolidation and economic reforms.

During the meeting, the Fund set tough conditions for additional measures that included imposing roughly Rs600-800 billion in additional taxes.

Sources told ARY News that Pakistan was willing to impose taxes to the tune of Rs200 billion through a ‘mini-budget’, while the Fund pressed Islamabad to foist over Rs600 billion additional taxes.

The lender also demanded the government increase tax collection to 1 percent of Gross Domestic Product (GDP). Sources claimed that the Fund demanded the government fix next fiscal year’s tax collection target at Rs8.3 billion.

Read More: ‘Mini budget’: Govt likely to impose additional duty on luxury goods

Sources further claimed that the IMF also demanded to end phase-wise incentives of sales tax. It also demanded to increase sales tax on petrol from 11 percent to 17 percent, sources said, adding that Fund demanded to end Rs110 billion relief granted to textiles and other industries.

Earlier in the day, it was reported that the federal government assured the International Monetary Fund (IMF) team of a hike in the power tariff.

According to sources, the government will increase the power tariff by Rs 6.79 per unit and it will increase stepwise in the next five months.

The power division briefed the IMF team about the plan to reduce the circular debt by increasing electricity prices and preventing power theft and line losses.

IMF mission arrives

It is pertinent to mention here that an International Monetary Fund (IMF) mission arrived in Islamabad on January 30 to discuss the stalled ninth review of the $7 billion Extended Fund Facility (EFF).

Sources told ARY News that Pakistan and the Fund will hold technical talks for the first four days, wherein economic data from different departments will be reviewed.

Prime Minister (PM) Shehbaz Sharif had said that the coalition government wants to complete the ninth review without any further delay and he had told IMF chief executive about Pakistan’s willingness.

“I have told the IMF chief executive that Pakistan is willing to complete the pending review and incorporate the conditions raised by it,” he added.