Roving Periscope: Pakistan to impose fresh PKR 170 billion in taxes, cries for IMF’s $1.1 billion installment
Virendra Pandit
New Delhi: Reeling under a collapsing economy, severe hardships, and a massive foreign debt burden of over USD 130 billion, cash-strapped Pakistan late on Wednesday introduced a money bill in Parliament to raise PKR 170 billion in fresh taxes (“mini-Budget”) by June this year as part of the strictest terms and conditions of the International Monetary Fund (IMF) to get the ninth tranche of USD 1.1 billion of a loan of USD 7 billion agreed in 2019.
Ever since it joined the IMF in 1950, Pakistan has rushed to the global lender as many as 23 times to seek bailout packages.
Nearly a third of Islamabad’s external debt, or over 30 percent, is owed to Beijing alone which invested around USD 40 billion in the USD 62 billion China-Pakistan Economic Corridor (CPEC) so far. This is three times more than its IMF debt and is greater than its borrowings from the World Bank and Asian Development Bank (ADB) combined, the media reported.
Finance Minister Ishaq Dar presented the Finance (Supplementary) Bill, 2023, in the National Assembly, the Lower House, empowered to legislate on money matters.
From January 31 to February 9, an IMF bailout mission held marathon talks with Pakistani officials in Islamabad but failed to reach a deal as the international lender demanded prior actions before signing any agreement to release USD 1.1 billion out of the USD 7 billion bailout package.
Among the strict IMF conditions, according to reports, was the publication of assets owned by government officials, including the army, bureaucrats, judges, and politicians, which the government found difficult to accept.
Dar said the government was aware of the hardships of common people and tried its best to not burden them further through new taxes.
But the fresh tranche of taxes will make life even more difficult for the common Pakistanis who are already reeling under an unprecedented 27 percent inflation with prices of all essential commodities and services skyrocketing.
Pakistan’s total external debt stood at USD 130.433 billion by the end-2021, including the use of IMF credit of USD 10.841 billion, up from USD 8.902 billion in 2020.
The long-term external debt rose to USD 110.610 billion in 2021 from USD 99.563 billion in 2020. Short-term external debt was USD 8.983 billion in 2021 in comparison to USD 7.230 billion in 2020.
The increased liquidity pressures in poor nations go hand in hand with solvency challenges which result in debt overhang. The World Bank noted that the debt overhang is unsustainable for dozens of nations. According to the report, the deferral process needs a detailed reconciliation between debtor and creditor records and has been administratively costly, as per the news report.
Dar said the economic challenges faced by Pakistan are majorly caused by exogenous factors and difficulties in dealing with IMF staff.
