Mini Budget in Connection with the IMF Agreement
The Finance Minister, Ishaq Dar, has confirmed that Pakistan has received a Memorandum of Economic and Financial Policies and a Letter of Intent from the International Monetary Fund. He announced that an additional Rs. 170 billion in taxes would be imposed in order to fulfill the requirements of the IMF’s program and to secure over $1.1 billion in bailout funds.
In a press conference earlier , Dar provided details about the Rs. 170 billion in fiscal taxes and energy sector reforms, stating that the government’s main focus was on reducing untargeted subsidies while imposing significant taxes on priority areas.
Federal Minister for Finance and Revenue, Senator Mohammad Ishaq Dar briefing the media on economy alongwith other Federal Ministers in Islamabad on January 04, 2023.
Minister Dar stated that the discussions with the IMF, which lasted for 10 days, included topics such as the power and gas sectors and fiscal and monetary matters. He mentioned that the State Bank of Pakistan governor and representatives from various departments and ministries were present during the talks. Dar also highlighted that Prime Minister Shehbaz Sharif personally assured the IMF that the government would fulfill all the conditions outlined in the agreement.
Bilateral Support and Forex Reserves
According to the details shared by Finance Minister Ishaq Dar, the government will impose a fuel surcharge of Rs. 10 per liter on diesel starting next month. Dar stated that the demand from the IMF to impose a Goods and Services Tax (GST) on petrol was not accepted. The cost of electricity is one of the major challenges facing the economy, with costs estimated at Rs. 300 billion while only receiving Rs. 1,800 billion. To address this issue, the government plans to implement strict reforms in the energy sector in order to prevent the growth of circular debt in the power and gas sectors and to restore the IMF loan facility.
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The IMF team has expressed their appreciation for the Prime Minister’s commitment to implement the necessary policies to maintain macroeconomic stability. They emphasized that the timely and decisive execution of these policies, along with unwavering financial support from official partners, will be crucial for Pakistan to regain stability and achieve sustainable growth. The team thanked the authorities for the productive discussions and emphasized the importance of following through on their commitments.