The Pakistani government has approved the imposition of new taxes on electricity to generate additional revenue of Rs 170 billion to meet conditions set by the International Monetary Fund (IMF), according to a statement. The country also agreed to increase the General Sales Tax (GST) rate from the current 17 per cent to 1 per cent in just four months.
The Finance Minister on Friday chaired the meeting of the Economic Coordination Committee (ECC) where it was unit in average power tariff apart from quarterly tariff adjustment of up to Rs 3.21 per unit for one year and pending fuel cost adjustment of up to Rs 4. There was recovery. per unit for about three months.
A delegation of the global lender held 10-day marathon talks with Pakistan officials to release the next tranche of USD 1.1 billion from an earlier agreed loan, but left for Washington on Thursday without signing a staff-level agreement. Have become.
The ECC also approved discontinuance of power tariff subsidy for zero-rated industries as well as the farmer package from March 1 subject to fulfillment of other pre-action conditions by the IMF. The meeting approved a comprehensive revised circular debt (power sector debt) reduction plan of Rs 952 billion for the current financial year, including an additional Rs 335 billion to meet another condition, the finance ministry said in a statement. Budget subsidy will also be included. on Saturday.
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Approving these measures, which will further burden the public with costly electricity and other household items, the ECC approved a technical supplementary grant of 450 million rupees in favor of the Ministry of Defense, indicating that the country still has to spend on defense would continue when the economy was in dire straits.
Earlier, Pakistan suffered a setback when the IMF team left without an agreement to finalize the 9th review of the USD 7 billion loan that was initially agreed upon in 2019 and later suspended It was launched when Pakistan failed to meet the conditions but revived after fresh commitments in August last year. , Unlike previous practices, this time the IMF insisted that Pakistan must take pre-emptive action before opening its coffers to the country, meaning that the public must be prepared to spend 170 billion rupees by June this year, when The current financial year will end. ,
Pakistan will increase GST by 1%
Among other measures, the country also agreed to increase the general sales tax (GST) rate from the current 17 percent to 1 percent in just four months. Meanwhile, forex reserves have fallen below USD 3 billion, putting more pressure on the rupee and fueling speculation of default and negatively impacting the equity market.
Internationally, Pakistani bonds due for payment in April 2024 fell 4.6 cents on the dollar, or nearly nine percent. Bonds with longer maturity dates fell between two and three cents each. Moody’s Investors Service said on Friday that Pakistan remains weak on the external payments front. “Pakistan’s government’s liquidity and external vulnerability risks have increased, and considerable risks remain around Pakistan’s ability to secure the financing needed to fully meet its needs for the next few years,” it said. .
(With inputs from PTI)
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