Pakistan approves new tax on power to meet IMF conditions
In light of an unexpected relief in tax measures from the International Monetary Fund (IMF), the pakistan government has decided to take a proactive approach and implement tax and non-tax measures from Feb 15 instead of March 1- the purported deadline proposed by the global lender - to secure quick release of 1.2 billion US dollar tranche.
Ahead of the start of much-delayed talks, the government was expecting that the IMF would ask for approximately 400 billion pakistani rupee in tax and non-tax measures, but as policy-level talks came to a close both sides agreed on 170bn rupee collection from tax and non-tax measures in the next four and a half months.
Official sources privy to talks told media that the Federal Board of Revenue (FBR) has already drafted two ordinances to impose 100 billion rupee in new taxes and R100bn rupee in flood levy on imports. 'We were expecting more demands from the Fund in the areas of taxes', the sources said, adding things have changed in the last two days of policy-level negotiations.
According to sources, the finance minister will decide the quantum share of FBR tax measures and non-tax measures (flood levy) in the total amount of 170bn rupee to be collected in the next 4 months.
Pakistan and IMF technical teams held several rounds of talks for 10 days which ended with an understanding to complete formalities for the staff-level agreement. At the end of the talks, Pakistan received a draft Memorandum of Economic & Fiscal Policies (MEFP).
Pakistan has only 3.5 billion dollar in reserves but owes more than 9 billion dollar in principal and interest payments in the next few months. Inflation has exceeded 25% in recent months and the country’s currency has plummeted to a historic low in value.
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