ISLAMABAD: Top government policy makers have reportedly advised the government to take urgent decisions to break the deadlock and revive the IMF programme. He cites political considerations as the main obstacle preventing top government decision-makers from taking drastic economic measures.
Prime Minister Shehbaz Sharif will have to take decisions on tough measures, including slapping additional taxes of Rs 300 to 400 billion, mainly increasing the rate of indirect taxes and withholding taxes, raising the per unit rate in anger, charging the consumers full electricity. Price included. 7.50 and an immediate hike in gas rates from 50% to 60%.
Sources told JEE News on Tuesday, “Disappointment is growing among top policy makers as they have clarified the strategy, the associated costs and the implications if the IMF prescriptions are not implemented as the adjustment continues. The cost will increase with each passing day.”
The current government wants a guarantee that they will continue to perform in the coming months as there are fears that they could be shown the door after taking tough decisions through utility price hikes and additional taxes.
Prolonged political instability has proved to be a major obstacle to taking tough decisions because the current government is unaware of the political capital it will pay if it takes tough decisions under the mandate of the IMF program. what will happen. The country is moving towards the next general elections. Hence, the ruling coalition has fallen into complete disarray and indecisiveness.
In Pakistan, the IMF is concerned about the authorities’ slowness in initiating reforms and their inability to implement structural reforms. The revolving debt has crossed Rs 4 trillion, so the government will have to increase electricity rates by Rs 7 30 paise per unit. Gas prices will also have to be increased to clear the revolving debt which has reached Rs 1640 billion. This will be mitigated by increasing the dividend and then tariffs of the two power sector giants.
The IMF has expressed its concerns over the FBR’s tax collection target of Rs 7,470 billion in the context of decline in imports and non-collection of Rs 855 billion in Petroleum Development Levy (PDL). The IMF also asked Islamabad to impose an additional tax of Rs 400 billion in the mini budget, which would be more than the government’s annual budget taxation measures of Rs 250 billion. If the government takes additional measures of Rs 400 billion, it can collect Rs 175 to 200 billion in the remaining period of the current fiscal year.
“Additional revenue can be raised only through indirect taxation and increase in withholding tax rates,” sources said. He further said that in the range of 1% to 3% it can be suggested to get additional 60 billion rupees from flood levy.
The government is mulling options to levy a levy on a deduction of 60% to 70% of the profits made by banks through alleged manipulation of exchange rates. The IMF also asked the government to consider implementing GST on POL products, but the government seemed reluctant to move forward. The IMF also prescribed more taxes on sugary drinks and tobacco, and withholding tax rates on property transactions could be jacked up. The top IMF officials held a meeting with the FBR team last week ahead of the Geneva conference but since then, the fund team has not contacted them till now.
A senior Finance Division official, when contacted on Tuesday, said there were still hopes that the government would refinance $700 million in trade loans from China, $2 billion in additional deposits from Saudi Arabia, $1 billion from the United Arab Emirates and $1 billion. Dollars can potentially save. Billions in commercial loans from Dubai-based banks.
In fact, after the payment of $300 million to China, the foreign exchange reserves held by the State Bank reached almost $4 billion as the State Bank reported that it was $4.3 billion as of January 6, 2023.
