Rs. 150 Billion Mini-Budget Likely to Appease IMF

The federal government has all but decided to bring a money bill through an ordinance in two to three days for the imposition of more than Rs. 150 billion in taxes.

Sources told Propakistani that the Prime Minister on Thursday also held a meeting for the finalization of proposals with regard to introducing a mini-budget.

Sources said that the government will bring the ordinance in the next two to three days to meet most of the conditions of the International Monetary Fund (IMF) with regard to the imposition of an additional Rs. 150 billion taxes but also to increase gas and electricity prices.

Presidential Ordinance has proposed an increase in capital value tax (CVT) on imported and locally manufactured cars from 1 to 2 percent ; a 3 percent flood levy on imported goods; increase in the rates of the federal excise duty (FED) on beverages; imposition of sales tax on petroleum products (notification); increase in withholding tax rates including WHT on property transactions; withdrawal of sales tax exemption on imported inputs/raw materials for export sectors and (vii); increase in the rates of the FED on cigarettes.

Sources added that a flood levy will also be imposed on imports through the mini-budget and a flood levy will be levied on imported raw materials and furnished items. The ordinance will levy a flood levy of up to 3 percent on imported luxury items. In addition, there are proposals for the imposition of flood levy on foreign exchange profits of banks.

Meanwhile, State Minister for Finance and Revenue Dr Aisha Ghaus Pasha in a briefing to the Senate Standing Committee on Finance and Revenue said that the government will bring the ordinance after discussions with the IMF. She said that the reason for the delay in the agreement with the IMF is to relax the strict conditions.

The proposed reforms of the IMF will burden every man but we are trying to convince the IMF that the burden, especially the effects of taxes should not put an unnecessary burden on the common man, she added.

  • Following tough decisions are to be undertaken by GOP within the next 10 days.

    1. US$ to be floating rate means 12-15% further devaluation, which will bring parity to around 255-260;

    2. Increase in Electricity tariff by Rs. 7.50/unit – 25%;

    3. Increase in sui-gas rates by Rs. 600/mmbtu – 75%;

    4. Increase in Petroleum Development Levy by Rs. 17.50 – 50%;

    5. Imposition of sales tax on Petroleum Products.

    Along with the above, GOP is prepared to bring a mini budget in which it will impose taxes amounting to Rs. 200 b.

    Now, compute all the above and try to figure out the rate of inflation. Experts think it will be 35%, whereas I am of the view that it will bring hyperinflation and will have severe effects on ordinary man.

    Restrict expense and keep swimming and floating. Remember, it is a marathon race where everyone who touches the line will be a winner.

    May Allah SWT give us strength and courage to overcome these issues.

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