Islamabad: After the International Monetary Fund (IMF) issued its press release about concluding their visit to Pakistan, finance minister Ishaq Dar announced a tax imposition of Rs 170 billion before the mini-budget to secure the bailout package.
The press conference which was scheduled to take place late night on February 9, 2023, to deliver, as promised by the minister a ‘good news’ was delayed to early morning of February 10. Despite the ten days talk, from January 31 to February 9, a staff-level agreement about the bailout package could not be achieved.
Dar said in the presser that the talks had ended positively and tax collection of Rs 170 billion was necessary to revive the loan programme. He also confirmed that Memorandum of Economic and Financial Policies (MEFP) has been received. “I am confirming that the MEFP draft has been received by us at 9am today,” he said. “We will completely go through the draft over the weekend and will hold a virtual meeting with fund officials on Monday. It will obviously take a few days.”
The MEFP is a key document that describes all the conditions, steps and policy measures on the basis of which the two sides declare the staff-level agreement.
The finance minister shared that the country would receive a $1.2bn disbursement in the form of Special Drawing Rights after the review’s completion.
Further policy agreements
The minister clarified that the fiscal gap of Rs 170 billion will be recovered through indirect taxes as opposed to rumours around Rs 700-800 billion fiscal gap. The measures will take the shape of indirect tax, instead of direct tax to “minimise the burden on the common man as much as possible,” he added.
In addition, the government had agreed to minimise untargeted subsidies in the energy sector. There has also been an agreement to not increase the gas sector’s circular debt. The minister highlighted that the government had already fulfilled the commitment to raise the petroleum development levy (PDL) on petrol to Rs 50 per litre, whereas the PDL on diesel would also be raised to Rs 50 in the coming months. However, the general sales tax would be readjusted within the upcoming finance bill and prices of petrol will be increased in two phases by Rs 5, on March 1 and April 1.
Additionally, some relief measures have also been agreed upon. The Benazir Income Support Programme’s (BISP) allocation has been increased from Rs 360 billion to Rs 400 billion to support the most vulnerable in the economy.
During the conference, Dar mentioned that the government’s performance has weakened the credibility with the IMF has weakened. “They say not only did the previous government not implement the agreement but also reversed when the vote of no-confidence was brought (against Imran Khan),” he remarked.