KARACHI: In an effort to overcome the impasse in securing a loan program from the International Monetary Fund (IMF), Pakistan has imposed an additional tax burden of Rs215 billion on its citizens. The decision was announced by Finance Minister Ishaq Dar during discussions on the budget for the fiscal year 2023-24 in the National Assembly.
Finance Minister Dar expressed confidence that the ongoing ninth review with the IMF, under the extended fund facility (EFF), would soon be concluded. While acknowledging Pakistan’s full compliance with prior actions, he highlighted the inability to materialize due to a shortfall in external financing.
To address this issue, Prime Minister Shehbaz Sharif held two meetings with the Managing Director of the IMF in Paris. Both parties agreed to make a final effort to complete the pending review, resulting in the agreement to implement additional taxation measures amounting to Rs215 billion. Minister Dar assured that these measures would not burden the poor population and that current expenditures would be reduced by Rs85 billion without affecting the annual development plan, salaries, and pensions of government employees. The IMF has approved this approach.
In an effort to promote transparency, Minister Dar pledged to share the details of the meetings with the IMF with the public. Once an agreement is reached, it will be uploaded to the finance ministry’s website. As a result of the understanding with the IMF, the annual tax collection target of the Federal Board of Revenue (FBR) will be raised from Rs9200 billion to Rs9415 billion. The total budget outlay will now be Rs14480 billion, and these measures are expected to contribute to reducing the fiscal deficit.
Recognizing the need for pension reforms, Minister Dar announced a series of measures to address the unsustainable nature of the expanding pension budget. These include the establishment of a Pension Fund, the abolition of multiple pensions for officers of grade 17 and above, and the provision of a single pension for retired officers. The Finance Minister also highlighted the allocation of funds for essential commodities, the armed forces, climate change, food security, and schemes to facilitate overseas Pakistanis.
Minister Dar reaffirmed the government’s commitment to maintaining the super tax introduced last year, making it more progressive, and enhancing the tax-to-GDP ratio. He clarified that the tax on bonus shares and cash dividends would be borne by the shareholders themselves, and a windfall gain tax would be implemented to add value to the economic system. The Finance Minister also announced a grace period for manufacturers of inefficient fans to upgrade their technology and produce more energy-efficient fans.
In addressing the large number of pending tax cases in the courts, Minister Dar stressed the need to strengthen the Alternate Dispute Resolution System and proposed the establishment of a committee to resolve tax-related matters. He assured that the government would continue to follow austerity measures and withdraw import restrictions to enhance the country’s foreign exchange reserves.
The demands for grants pertaining to various ministries for the upcoming fiscal year were approved by the National Assembly, with opposition cut motions against certain divisions being rejected. Minister Dar also mentioned the government’s plans to support young filmmakers.