The government will impose taxes amounting to approximately Rs 170 billion to revive the loan program.
Dar confirmed receipt from the IMF of the draft Memorandum of Economic and Financial Policies (MEFP) and reminded the public that the program being implemented was signed by the previous Prime Minister Imran Khan. According to him, the current government, led by Prime Minister Shehbaz Sharif, is committed to reaching an agreement as a matter of “sovereign commitment.”
A wide range of topics were discussed during the 10-day meeting, including those related to power, gas, fiscal policy, and monetary policy. The governor of the State Bank of Pakistan (SBP) and representatives of various departments and ministries participated in the meeting. It has been confirmed by Dar that taxation measures of Rs 170 billion have been agreed upon, rather than the previously rumored Rs 700-800 billion. The taxes will have to be recovered within four months of the fiscal year.
In the energy sector, reforms have been agreed upon, including checking the flow of circular debt and reducing untargeted subsidies. Dar stated that some of the IMF’s suggested reforms are in Pakistan’s best interest and Prime Minister Sharif has assured the IMF of their implementation.
As for the economy, Dar acknowledged its poor condition, ranking 47th, and attributed it to mismanagement and mishandling by previous governments. He stated that reforms, although painful, are necessary, particularly in the power sector where Rs 3,000 billion is spent on electricity generation but only Rs 1,800 billion is recovered.
The government has decided to complete the IMF program for the second time, which will result in receiving $1.2 billion following approval by the IMF Executive Board. As part of the effort to ease the burden of inflation on vulnerable segments of society, the budget of the Benazir Income Support Program (BISP) will also be increased by Rs 40 billion.
Despite the depletion of foreign exchange reserves, Dar assured that the reserves will be replenished with the assistance of friendly countries. He blamed the previous government for the current credibility gap with the IMF, citing failure to implement reforms and a negative portrayal of Pakistan’s image. However, the government and IMF reached a mutually agreed compromise, with no sales tax imposed on petroleum products. The general sales tax will be added to the Rs 170 billion in taxes.