Pakistan has made a commitment with the IMF to increase taxes by a massive Rs1.272 trillion, roughly 1.28 percent of the GDP. The government will meet a dozen conditions in six months to remain in the bailout programme which is set to increase the burden on the masses.
The government is in the process of increasing electricity prices by Rs5.65 per unit – a whopping 36% till October which will impose a burden of Rs884 billion on consumers. In addition, the government will impose new taxes of around Rs600 billion in June as part of the IMF’s condition. These changes will be implemented within the remaining three months of the ongoing fiscal year before the next budget.
The government has appointed a new FBR chairman, the sixth during its tenure. He has been given a colossal revenue target of Rs6 trillion by increasing income and sales taxes and withdrawing exemptions. This will increase the burden on the salaried class and the cost of consumer goods. From July, we would see a rise in prices of food items, medicines, live animals, education, and health-related goods.
The government set up a petroleum levy target of Rs450 billion but the IMF has projected it at Rs511 billion. This implies that petrol prices will also rise in the coming months. These taxes and levies will strongly shape the upcoming budget, reducing expenditure on development projects. Over half of the tax collection will go into debt servicing, leaving very little for productive proposes.
The government has failed to meet its tax collection target for the third consecutive year while foreign debts have kept on piling, reaching a staggering 93 percent of GDP. There IMF has painted a gloomy picture ahead of the economy, saying that unemployment and inflation will rise this year. The growth rate is projected at just 1.5 percent, even lower than the government’s own forecast of 2.1 percent. There will certainly be huge challenges ahead as the government attempts to bring the economy on track.
The prime minister has brought a new economic team but it is unlikely to solve the problem. The foreign exchanges reserves have increased and Pakistan has entered capital markets. However, the problem persists with rising food prices and inflation. IMF loans will never lead to progress but will only lead to newer problems which we will see in the coming months.
