The International Monetary Fund (IMF) has sought an increase in taxes and other reforms from the Pakistan government before reviving its $6 billion bailout package for the country
The International Monetary Fund (IMF) has sought an increase in taxes and other reforms from the Pakistan government before reviving its $6 billion bailout package for the country. The government is set to introduce related bills in Parliament this week.
“The introduction of Finance Bill in the National Assembly to increase taxes and approval of the State Bank of Pakistan (SBP) Amendment Bill are pre-conditions for the revival of International Monetary Fund (IMF) loan program,” Shaukat Tarin, financial advisor to Pakistan PM, who has been holding talks with the IMF, was quoted as saying by the Express Tribune.
The global lender has also asked the government for a balanced budget, cutting government spending, and excluding the payment of interest on public debt. Other conditions were Rs. 1.95-per-unit increase in electricity prices and the approval of the Circular Debt Management Plan, envisaging a further tariff increase of Rs5.65 per unit.
The country’s trade deficit, growing since the last six months, is also worsening its balance of payment crisis. High global prices for oil, fuel, and other essentials further added a burden to its import bills. Upon fulfilling conditions, the IMF board would approve a $1 billion loan tranche.
Last month, the government had increased electricity prices--one of IMF’s many preconditions. Other crucial demands are the introduction of the Finance Bill and the approval of the SBP Amendment Bill, required for giving institutional autonomy to these financial institutions.
The IMF has softened its conditions in comparison to April last year, Train said, adding that the talks were still in a delicate situation and needed cooperation from all sides. Through new tax measures, the government planned to raise around $2.3 billion.
For now, the spendings on the Public Sector Development Programme (PSDP) would be shelved but it could be resumed by the end of the current fiscal year based on good fiscal performance. Besides that over $2.3 billion is expected to be saved through the new Circular Debt Management Plan.