National News

To restart a delayed IMF program, PM Shehbaz Sharif is prepared for “difficult decisions.”

PM prepared for difficult decisions

ISLAMABAD: According to Prime Minister Shehbaz Sharif on Wednesday vowed to enforce tough decisions to end the impasse with the International Monetary Fund (IMF).

The difficult choices include raising the prices for gas and electricity as well as announcing a minibudget for enacting additional taxing measures to raise Rs150-200 billion.

The premier presided over an online conference Wednesday evening for almost three hours and thirty minutes, according to official sources.

The State Minister for Petroleum Musadik Malik did not respond when questioned about the potential increase in the cost of gas and electricity.

However, in accordance with people familiar with the circumstances. It is anticipated that the cost of gasoline will rise from Rs650 to Rs1,100 per MMBTU.

The government intends to recoup between Rs800 and Rs850 billion through the new price increase from the enormous circular debt of Rs1,640 billion owed by SNGPL and SSGCL.

In the meantime, during the current fiscal year, the government is proposing increasing the energy rate from Rs4.50 per unit in the first phase to Rs3 per unit in the second.

The government had set a target for FBR tax collection of Rs7,470 billion, however, up till December, FBR fell short by Rs225 billion. By a margin of Rs82 billion for the end of December 2022, the collection fell short of the IMF’s target.

According to the FBR’s internal estimate, the tax collection system will experience a shortfall of Rs170 billion for the current fiscal year, resulting in a tax collection of Rs7,300 billion as opposed to the earlier anticipated target of Rs7,470 billion.

The government will need to take further measures that could generate Rs300–400 annually in order to make up for the FBR’s shortfall. It would be a painful process for the government to impose extra taxes and rate increases through a potential presidential ordinance.

A 1–3% flood levy on imports is what the Pakistan Muslim League Nawaz (PML-N) administration proposes to impose in order to raise Rs100 billion.

Second, the government is reportedly considering levying a 60–70% tax on the purported profits made by commercial banks from manipulating the currency rate. The banks calculated that in the first nine months of the year 2022, unusual earnings totaled about Rs100 billion.

There will undoubtedly be an increase in the Federal Excise Duty (FED) on cigarettes and sugary drinks. Additionally, it’s likely that POL products will be subject to GST. Ishaq Dar, the finance minister, vehemently opposed placing a 17% GST on POL items in the past, claiming that it would be extremely inflationary.

It is unclear how the government will react to the IMF’s request to permit the rupee to weaken versus the US dollar. Ishaq Dar, the finance minister, will never let a free fall in the exchange rate, but he will need to increase the inflow of dollars in the next weeks and months to alleviate the dollar liquidity crisis.

 

 

 

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