Pakistan’s finance minister vows to maintain new retail taxes despite strike threats, as the country seeks to secure IMF approval for a $7-billion loan.
Bollywood Fever: Pakistan‘s finance minister, Muhammad Aurangzeb, vowed on Tuesday to press forward with plans to impose new taxes on the retail sector, despite threats of strikes from traders. The move is seen as crucial for securing the approval of a $7-billion loan from the International Monetary Fund (IMF).
The new taxes, which align with the ambitious revenue targets adopted to clinch a staff-level agreement on a 37-month IMF programme, have sparked public backlash since their introduction in the June budget.
However, Aurangzeb made it clear in a televised speech that the government would not reverse the decision, urging wholesalers, distributors, and retailers to contribute to the economy.
“This is not going to be taken back,” Aurangzeb stated, reinforcing the government’s stance amidst rising opposition.
Last week, retailers across Pakistan staged a nationwide strike to demand the withdrawal of the new tax scheme and relief from high electricity rates.
These protests are the latest in a series of demonstrations over the past few months against the new tariffs, taxes, and rising inflation.
Muhammad Sharjeel Goplani, chairman of the All-City Tajir Ittehad Association, had even threatened an indefinite strike if their demands were not met, though no further action has been announced since.
Aurangzeb indicated that Pakistan is in the advanced stages of securing IMF board approval, having earlier suggested that the approval was expected in September. Prime Minister Shehbaz Sharif also stated that the government is committed to adopting IMF conditions and completing the loan programme, which he hopes will be the country’s last.
The IMF board’s approval is contingent upon Pakistan receiving confirmation of financing assurances from development and bilateral partners.
Media reports have indicated that the approval has been delayed due to a lack of additional financing and unpaid energy sector subsidies announced by the Punjab province and the federal government.
Punjab’s information minister, Azma Bukhari, responded by stating that the federal government and the IMF had not contacted the province about the electricity subsidy, and that the IMF had not issued any written statements on the matter.
Reining in unresolved debt within Pakistan’s power sector remains a top priority for the IMF. The Fund ended a $3-billion bailout in April, which led to higher tariffs, significantly impacting the poor and middle class, and reducing household energy use for the first time in 16 years.
Moody’s recently upgraded Pakistan’s rating to Caa2, citing increased certainty on external financing following the IMF staff-level agreement. The credit rating agency expects the IMF board to grant approval within weeks.
As Pakistan continues to navigate these economic challenges, the government’s resolve to maintain the new taxes will play a critical role in securing the much-needed IMF loan.
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