Minister for Finance and Revenue Senator Ishaq Dar Wednesday introduced the Finance Bill 2023 or the “mini-budget” in the National Assembly as the government seeks to fulfil the prerequisites for unlocking the $1.1 billion International Monetary Fund (IMF) loan.
Running against time to pacify the IMF for the revival of the bailout programme, the government had last night approved hiking the General Sales Tax GST rate from 17 to 18% and increasing the Federal Excise Duty (FED) on cigarettes in order to fetch an additional Rs115 billion out of Rs170 billion agreed to by Pakistan in line with the IMF conditions.
- Govt has increased GST on luxury items from 17% to 25%
- FDE on business and first-class air tickets to now be Rs20,000 or 50% — whichever is higher
- 10% withholding adjustable advance income tax to be imposed on bills of wedding functions
- Increase in FDE on cigarettes, soft and sugary drinks — from Rs1.5 per kg to Rs2 per kg
Senior officials at the Ministry of Finance told Geo News earlier that they expect the bill to be ascended by Thursday morning, which will pave the way not only for the IMF monies but funds from multilaterals and bilaterals.
Pakistan and the IMF could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks, but said negotiations would continue. The $350 billion economy is in dire need of funds as it battles a wrenching economic crisis.
In a bid to appease the IMF, the government sought to roll out the fiscal measure through an ordinance, but President Dr Arif Alvi advised the administration to seek the parliament’s consent instead.
An agreement on the ninth review of the programme would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed upon in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover 18 days’ worth of imports.
In his address to the lower house, FinMin Dar said that the nation is facing unprecedented crises due to the Pakistan Tehreek-e-Insaf (PTI) government’s “substandard” policies.
The country, during the Pakistan Muslim League-Nawaz’s (PML-N) previous government, had witnessed economic development and the gross domestic product (GDP) had increased by $112 billion.
“The PML-N always tries to take fewer loans. Foreign investment had also increased during PML-N’s tenure. In contrast, during the PTI’s government, the loans hit record highs, and a common man’s income also plunged.”
The finance czar said that apart from overcoming the challenges that the present government faces due to PTI’s policies, last year’s floods had also incurred losses worth more than $8 billion.
“But, we should always prefer the state over politics,” he reiterated — the mantra that PDM leaders have time and again propagate as they face an uphill task on the economic front.