ISLAMABAD: The federal cabinet will approve today Rs170 billion taxes for the mini-budget to meet another harsh requirement of the IMF.
The government has informed the IMF about this development taking place on Tuesday.
After the approval of the cabinet, a Presidential Ordinance will be issued to impose Rs170 billion taxes forthwith.
The government, nonetheless, has dropped the idea of levying the flood levy on imports as the IMF opposed it.
The government, however, intends to enhance the general sales tax rate by 1%, to 18 per cent, from existing 17 per cent.
Additionally, the petroleum levy on high-speed diesel is being enhanced from Rs40/liter to Rs50.
According to the Finance Ministry officials, the economic team of the government has shared their observations and commitments with the IMF through a virtual meeting on Monday.
The meeting reviewed the process of the enforcement of the Memorandum of Economic and Financial Policies (MEFP).
Meanwhile, the federal cabinet approved a plan to raise the power rate and eliminate subsidies ahead of virtual negotiations with the International Monetary Fund (IMF) on the Memorandum of Economic and Financial Policies (MEFP).
The cabinet also approved a new circular debt management plan through circulation.
Last week, a team from the Washington-based lender wrapped up policy-level negotiations. However, the the government and the IMF could not reach an agreement due to disagreements on fiscal actions.
cabinet approves power tariff Hike
The government will increase power costs by Rs7.91 per unit in four quarterly adjustments. Four quarters are; February and March 2023, March and May 2023, June and August, and September and November, according to the proposal approved by the cabinet yesterday and to be presented to the IMF.
According to the plan, from now on, the government will charge Rs3.21 per unit, Rs0.69 from March to May, and an additional Rs1.64 per unit from June to August 2023. The government would increase the cost of electricity by Rs1.98 per unit from September to November.
The consumer base rate will rise from Rs15.28 per unit in June 2022 to Rs23.39 per unit through June 2023.
In addition, the government has agreed to terminate the Rs65 billion electricity subsidy offered to exporters in March 2023.
The government will be able to recover Rs. 51 billion from the termination of the electricity subsidy for exporters, and Rs. 14 billion from the termination of the electricity subsidy under the Kissan Package as of March 2023. The electricity subsidy of Rs12.13 per unit will be refunded to the export sector.
The Pakistani Government has received the IMF’s Proposed Menu, but there are still open questions regarding the precise taxation measures, the raising of the energy base rate, and obtaining assurances for Gross External Finance.
The MEFP’s suggested menu has been the subject of ongoing discussion among Islamabad’s policymakers for the past two days.
The Pakistan’s economic team and IMF will hold a virtual discussions this week to finalize specific taxation measures, resolve the lingering disagreement over the electricity base tariff, and incorporate gross external financing requirements and a target for Net International Reserves (NIR) by the end of June 2023.