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Print

‘Mini-budget’ approved by Cabinet

  • The government aims to raise billions of rupees by withdrawing the sales tax exemptions so that all sectors pay a uniform 17% levy new duties and revise tax collection target
Updated 31 Dec, 2021

ISLAMABAD: Federal cabinet on Thursday approved a supplementary budget that plans to end exemptions on sales tax and levy new duties as part of fiscal tightening measures aimed at winning funding from the International Monetary Fund (IMF).

The IMF approval is also a pivotal endorsement for country’s economy, which is struggling with external and current account deficits, a depreciating currency, struggling foreign reserves and rising inflation.

The IMF agreed last month to revive a stalled $6 billion funding programme, but demanded further budgetary tightening and central bank autonomy from Pakistan before the next tranche could be approved.

The IMF board meets on Jan. 12 to approve the tranche.

Prime Minister Imran Khan’s government will need its allies’ support in parliament to win a simple majority to pass the finance bill.

NA session adjourned after govt tables SBP amendment bill, 'mini-budget' amid ruckus

The government aims to raise billions of rupees by withdrawing the sales tax exemptions so that all sectors pay a uniform 17%, levy new duties and revise tax collection target, officials said.

The withdrawal of the sales tax exemptions would raise 343 billion rupees ($1.93 billion), said Finance Minister Shaukat Tarin, adding that he negotiated this against the IMF’s demand of removing 700 billion rupees of exemptions. “We didn’t do anything that will burden the poor,” he told a news conference after tabling the budget in parliament following its approval by the cabinet, amid opposition parliamentarians chanting anti-government slogans.

Parliament will debate and vote on the bill in the coming days. Tarin said the tax exemptions would largely be removed from luxury imported items.

Tarin also introduced separate legislation to give the central autonomy.

The proposed autonomy law has not been made public yet, but officials say it will give the central bank independent powers to control price stability, monetary policy decisions and a guaranteed tenure for its governor.

Surging food and energy prices have put Khan under increasing pressure in recent months as household bills have caused growing anger among the middle classes, which had provided his government’s main support base.

Comments

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Ayesha Emad Khan Dec 31, 2021 02:07pm
Wow!! Would we consider this a blessing-in-disguise for correcting the looming balance-of-payments crisis; or shall we keep considering this as a stance for controversy against the ruling elite. History is witness to the nations who not mend their lavish ways become a slave of their desires till they eventually are wiped off. Are we heading towards the same? Seems government efforts on structural reforms for domestic industry and commerce can help present a complete and real picture of where we are and enable public to direct their thought-process correctly. And if there aren't adequate measures taken by the government on similar subjects, government advisors and concerned stakeholders should wake up.
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