ISLAMABAD: Prime Minister Shahbaz Sharif on Wednesday reportedly agreed to implement tough decisions to break the deadlock with the International Monetary Fund (IMF).
The tough decisions include hikes in gas and electricity rates and the unveiling of a mini-budget for more tax measures to raise Rs 150-200 billion.
Official sources told JEE News, “The Prime Minister presided over an online meeting for about three hours and thirty minutes on Wednesday evening in which important decisions were taken. However, the meeting is expected to be reconvened on (today) Thursday to take more important decisions.
Minister of State for Petroleum Mossadegh Malik did not respond when asked about the possible hike in electricity and gas prices.
However, sources, who are aware of the development, said the gas tariff is expected to increase from Rs 650 per MMBTU to Rs 1100 per MMBTU on average.
SNGPL and SSGCL have a huge revolving debt of Rs 1,640 billion, the government plans to recover Rs 800-850 billion through new tariff hikes.
Meanwhile, in the power sector, the government is considering increasing electricity rates to Rs 4.50 per unit in the first phase and Rs 3 per unit in the second phase within the current financial year.
The government’s FBR tax collection target was Rs 7470 billion, but the FBR remained short by Rs 225 billion till December. Collections missed the IMF’s target by the end of December 2022 by a margin of Rs 82 billion.
FBR’s internal assessment shows that the tax collection machinery will face a shortfall of Rs 170 billion for the current fiscal year, so tax collection will be Rs 7,300 billion against the initial target of Rs 7,470 billion. .
The government will have to take additional measures to meet the shortfall from FBR, which could fetch Rs 300-400 crore annually. Imposing additional taxes and increasing rates would be a troublesome process, which the government would go through through a possible presidential ordinance.
The Pakistan Muslim League-Nawaz (PML-N) government plans to impose a flood levy of 1 to 3 percent on imports to raise Rs 100 billion.
Secondly, the government is also considering imposing a 60 to 70 percent tax on alleged earnings of commercial banks through exchange rate manipulation. In the first nine months of the calendar year 2022, banks made extraordinary profits of around Rs 100 billion.
A hike in Federal Excise Duty (FED) on sugary drinks, and a GST slap on cigarettes and POL products are also on the cards. However, in the recent past, Finance Minister Ishaq Dar strongly opposed the imposition of 17 percent GST on POL products, arguing that it would lead to hyperinflation.
It remains to be seen how the government will respond to the IMF’s demand to allow the rupee to depreciate against the US dollar. Finance Minister Ishaq Dar will never allow the exchange rate to fall but he will have to generate dollar inflows in the coming weeks and months to ameliorate the dollar’s liquidity crisis.
