Pakistani President Dr. Arif Alvi on Thursday gave his assent to the Finance (Supplementary) Bill 2023, which aims to raise tax revenues in line with the International Monetary Fund’s (IMF) preconditions to approve a $1.1 billion bailout for Islamabad.
Summary of changes in mini budget#minibudget #IMF #Pakistan #IMF pic.twitter.com/rZsyn8t8Vj
— Fahad Rauf (@analystfahad) February 15, 2023
Mini Budget
The bill, being referred to as a “mini budget,” was sent to Alvi two days after being approved by the National Assembly. The passage was controversial, given that merely 65 out of 342 members were present.
It increases Goods and Services Taxes from 17% to 25% on high-end luxury goods such as imported food and mobile phones. It also raised taxes on aerated drinks, first and business-class tickets, cosmetics, and cement.
How the hell can you pass the mini budget with only 65 members present out of 342 ?
— Mir Mohammad Alikhan (@MirMAKOfficial) February 15, 2023
Is there any constitution left in Pakistan or this parliament has become a monkey circus.
At least 86 members were required.
ہے کوئ غیرتمند لفافی جو کُچھ بولے
According to Finance Minister Ishaq Dar, Alvi will also present austerity measures in the coming days.
Dar further reassured that the measures would not impact poorer communities and were largely intended to target wealthier communities.
IMF Discussions
Through these legal changes in its budget, Pakistan seeks to secure a staff-level agreement with the IMF this week, facilitating access to loans from bilateral and multilateral organisations. Sources cited by Dawn said that the agreement would be concluded on 28 February.
Federal Minister for Finance and Revenue, Senator Muhammad Ishaq Dar, called on President Dr. Arif Alvi today and apprised him about the progress in talks with the International Monetary Fund (IMF) and that all modalities have been agreed upon. pic.twitter.com/Hpn2xq740P
— The President of Pakistan (@PresOfPakistan) February 14, 2023
As a precondition to access the $1.1 billion, the IMF demanded that the government increase tax revenue by $650 million.
Islamabad had already raised $440 million through Statutory Regulatory Orders delivered since 14 February. The remaining will come into effect through Thursday’s bill. The IMF sought to increase taxes on the high earners of society and ensure that only poorer parts of the population get subsidies.
The success of these discussions is critical as Pakistan’s foreign exchange reserves have plummeted to $3 billion, which is enough to cover just three weeks of import. The inflation rate is predicted to soar to 30% in the first half of 2023.