- Blames previous government and last year’s devastating floods for the current economic situation
ISLAMABAD: The government has presented tax measures, including an increase of one percent in the general sales tax (GST) and tax on luxury items as well as duties to mobilise additional taxes of Rs170 billion in the next five months as agreed with the International Monetary Fund (IMF).
Finance Minister Ishaq Dar blamed the previous government and last year’s devastating floods for the current economic situation, before unveiling taxation measures after presenting the Supplementary Finance Bill, 2023, in the National Assembly.
However, the session was adjourned without approving the proposed legislation after Maulana Abdul Akbar Chitrali pointed out the lack of quorum. As soon as the finance minister ended his speech, the National Assembly speaker stated that the presented bill will not be referred to the concerned standing committee of the Lower House.
The finance minister, after holding the previous government responsible for the current economic situation, demanded the formation of a commission to determine as to who was actually responsible for the current economic mess.
Dar said that Pakistan had agreed during the 10-day-long talks with the IMF team on the 9th review to take taxation measures and now Rs170 billion additional taxes are being imposed. He said that some portion of it would be utilised to reduce the fiscal deficit as the government would reduce the flow of circular debt for the ongoing fiscal year from Rs853 billion to Rs336 billion.
He said that the power sector gap between the billed amount and recovery was Rs1,400 billion due to theft, line losses, and no-payment of bills as power generation cost is Rs3,000 billion, whereas, recovery is hardly Rs1,600 billion.
The finance minister added that;(i) GST on luxury items is being increased from Rs 17 percent to 25 percent;(ii) standard rate of GST is being increased from 17 percent to 18 percent;(iii) 20 percent FED on the air travel fare or Rs50,000 whichever is higher;(iv) 10 percent withholding tax adjustable on wedding events;(v) increase in FED on cigarettes; and (vi) per kg FED increase on cement from Rs1.50 to Rs2.
The finance minister said that the country is facing fiscal and current account challenges and revival of the IMF programme would increase foreign exchange reserves, stabilise the rupee, increase exports and remittances, besides help in dealing with LCs.
He said that over 30 million people have been affected by the floods and as per a study conducted by the World Bank, the Asian Development Bank (ADB), the EU and others with the help of the Planning Ministry, $30 billion in losses have been estimated: $16 billion to the economy and $14 billion to infrastructure.
The finance minister said that the government has also been working on sectoral reforms and agriculture can bring about a positive impact on the economy in the shortest possible time. Therefore, the prime minister has announced an agricultural package worth Rs2,000 billion for the farmers and is also providing Rs30 billion in loans to the youth related to agri-schemes.
He said that a subsidy is being given for tractors and threshers, adding that the DAP being imported will be provided to the farmers at less price and a Rs30 billion subsidy is being provided on imported urea for farmers.
He added that Rs10 billion has been earmarked for the development of small businesses related to the agriculture sector. He said the government has also increased BISP funding by Rs40 billion for vulnerable people. He said the federal cabinet would also take austerity measures.
Copyright Business Recorder, 2023