Finance Minister Ishaq Dar on Wednesday introduced the Finance (Supplementary) Bill, 2023 in the National Assembly and Senate, continuing efforts to revive a stalled International Monetary Fund (IMF) loan tranche to avert default.
Ahead of tabling the ‘mini-budget,’ the government on Tuesday night increased the general sales tax (GST) from 17 to 18 percent and also increased the Federal Excise Duty (FED) on cigarettes. These measures are aimed at generating revenue of Rs. 115 billion of the Rs. 170 billion committed to the IMF by Pakistan. The remainder Rs. 55 billion would be generated from the ‘mini-budget.’
Presenting the supplementary finance bill, Dar acknowledged that the “nation is facing unprecedented crises,” which he blamed on the policies of the ousted Pakistan Tehreek-e-Insaf (PTI) government. Maintaining that the preceding Pakistan Muslim League (Nawaz) government had facilitated economic development and seen foreign investment increase, he alleged that PTI had secured a record number of fresh loans and decreased the purchasing power of the common man.
In addition to overcoming the challenges posed by the PTI’s policies, said Dar, the incumbent government had also suffered losses of over $8 billion because of last year’s floods. “But, we should always prefer the state over politics,” he said, stressing that the government needed to reform the power sector, as committed to the IMF.
Emphasizing that the incumbent government was fulfilling promises made to the IMF by the PTI, he added: “We are paying a hefty political price for all this. We consider the state, and not politics, important.” Nonetheless, he claimed, efforts are underway to impose taxes in a manner that the common man does not suffer.
According to the minister, the government has allowed the import of five-year-old tractors and has set a target to install 75,000 solar tube wells to facilitate farmers. He recalled the government has already announced a Rs. 2,000 billion package for farmers, of which Rs. 1,000 billion had already been distributed. “Farmers will also be given cheap loans for agricultural tools and Rs. 30 billion will be given for fertilizers,” he said, adding Rs. 30 billion had also been earmarked for youth loans.
Stressing that the government was also striving to practice austerity and was reviewing a proposal to reduce its expenses, Dar said Prime Minister Shehbaz Sharif would soon take the nation into confidence regarding the mini-budget. “Initially, the economic growth will be slow, but will go up 4 percent later,” he claimed, adding a notification to issue Letters of Credit for medicines, petroleum, and sports equipment had been issued.
Among the taxation measures announced by Dar is an increase in the GST on luxury items from 17 to 25 percent. The FED on business and first-class air tickets would be increased to Rs. 20,000 or 20 percent of the cost of the ticket, whichever is higher; 10 percent withholding adjustable advance income tax to be imposed on marriage halls; increase in FED on cigarettes, soft and sugary drinks; an increase to the FED on cement from Rs. 1.5/kg to Rs. 2/kg; GST hike from 17 to 18 percent.
The “relief” measures announced by Dar are no GST on essential goods, such as wheat, rice, milk, pulses, vegetables, fruits, fish, eggs, meat. The government has also announced an increase to the stipend offered under the Benazir Income Support Program, allocating Rs. 400 billion for it.
According to Dar, the bill should be passed in both houses of Parliament early next week.
Increasing burden on people
Shortly after the ‘mini-budget’ was unveiled by Dar, PTI Chairman Imran Khan slammed the new taxes in a televised address, adding that he did not see any positive news for Pakistan’s economy even if the government fulfilled all IMF conditions. “The mini-budget will lead to more inflation. There is no solution to Pakistan’s problems except fresh elections,” he reiterated, without offering any alternate plan that he would bring about if he were in power.
Stressing that the ruling coalition had brought the country to the brink of default, he lamented that the mini-budget would merely serve to “increase the burden on the masses,” as it could trigger higher utility costs and boost inflation. “Our reserves have fallen below $3 billion, putting the country’s security at risk,” he said, lamenting that even if the IMF loan were secured, it would still need to be repaid and the country could not afford to keep taking on new loans to pay off old ones.