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Business News/ News / World/  Pakistan taxing its citizens for IMF deal: 7% surge in tax, luxury goods costly
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Pakistan taxing its citizens for IMF deal: 7% surge in tax, luxury goods costly

Kristalina Georgieva, IMF Managing Director has also emphasized two things that can help Pakistan get away from economic collapse and a loan from the financial body.

Pakistan is struggling with a huge economic crisis. (Reuters)Premium
Pakistan is struggling with a huge economic crisis. (Reuters)

Pakistan is facing an imminent economic meltdown with the country modifying its policies according to the conditions laid down by the International Monetary Fund, in an effort to unlock the tranche of a $6.5 billion loan facility to overcome the financial crisis. IMF's delay in sending loans is pushing the country's economy into a ‘tailspin’. 

The Washington-headquartered financial body has recently asked Pakistan to take steps to be able to ‘function as a country’ and not get into a dangerous situation where it needs debt restructuring, The News International, a Pakistan daily, reported.

Kristalina Georgieva, IMF Managing Director has also emphasized two things that can help Pakistan get away from economic collapse and a loan from the financial body. 

At first, she suggested raising tax revenues as those making good money in the public or private sectors, need to contribute to the economy. Secondly, she proposed a fairer distribution of precious resources by taking subsidies away from people who don't need them. 

Following this, the national assembly of Pakistan unanimously approved the government’s Finance (Supplementary) Bill 2023 or ‘mini-budget’, a move for seeking a $6.5 billion tranche of the IMF loan. The government has increased taxes on a raft of luxury imports and services. 

According to the bill, sales tax has gone up from 17% to 25% on imports ranging from cars and household appliances to chocolates and cosmetics. People will also have to pay more for business-class air travel, wedding halls, mobile phones, and sunglasses. A general sales tax was raised from 17 to 18 percent.

While passing the bill with few amendments in the parliament, Finance Minister Ishaq Dar informed that excise duty on business class ticket fares for those flying to South America has been fixed at 250,000, while for those traveling to Africa and the Middle East, the duty on business and first class fares stands at 75,000. 

He added that the excise duty on tickets to European countries is fixed at 150,000, while for business and first-class flight tickets to Australia, New Zealand, and other countries in the Asia Pacific, the duty has been fixed at 150,000, according to Geo Tv reports. 

Last week, Pakistan has also increased the petrol prices to Pakistani Rupees (Rs) 272 per liter to appease the IMF for unlocking the loan. 

The IMF, Saudi Arabia, and the United Arab Emirates have been interfering with Pakistan's polity. They have been calling for structural reforms in the economy when the people are suffering from delays in releasing the IMF's tranche. 

Meanwhile, Pakistan Defense minister Khawaja Asif has declared that the country has gone “bankrupt". He said that the solution to the country's economic problem lies within Pakistan, not with the International Monetary Fund (IMF) which has not announced any assistance package so far. 

Many companies have run out of raw materials or foreign exchange which has compounded the troubles of an economy that's trying to avert a debt default. The companies which have halted their operations include Suzuki Motor Corp, Ghandhara Tyre & Rubber Company, Toyota Motor Corp.’s local units, Engro Fertilizers Limited, Fauji Fertilizer Bin Qasim Limited, and others. 

The reports also stated that the mobile phone import stands at 93 billion during the first seven months (July – January) 2022-2023 amid challenging economic conditions. 

Despite the financial crisis in Pakistan , the country has also spent 4.15 billion on the import of gold during the first seven months of the current fiscal year, as compared to 2 billion during the same period of the last fiscal year. 

Pakistan's external debt servicing has also risen by 70% in the first two quarters of 2022-23, worsening the shortage of dollars, while the country's foreign exchange reserves held by the central bank rose by US$276 million to $3.193 billion for the week of February 10. The country's total liquid foreign exchange reserves stood at $8.702 billion.

The country's central bank has also released data on foreign direct investment into Pakistan, according to which, there has been around 44% decrease in the inflow of FDIs during the first seven months (July – January) of the fiscal year 2022-2023.

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Published: 21 Feb 2023, 10:55 AM IST
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