“The IMF’s Executive Board meeting for combined seventh and eighth reviews under the Extended Fund Facility (EFF) has been set for August 29.”
By Staff Reporter
ISLAMABAD: Pakistan has assured the IMF of a phase-wise increase in tax on petroleum products, citing a further raise of Rs10 per liter planned from September 1, officials said.
Under the planned tax, the government will have to increase the petroleum levy gradually up to Rs50 per liter to cover its budget shortfall.
“In the recently signed letter of intent (LoI), Pakistan has assured the lender of gradual increase in the levy by Rs10 per liter on motor gas and Rs5 per liter on diesel from September 1,” the official added.
The levy rate will gradually increase to Rs50 per liter on both petrol and diesel by January next. Presently a tax of Rs20 per liter is being collected on gasoline and Rs10 on diesel and kerosene. The government eyes collecting Rs855 billion from petroleum levy in the current financial year of 2022-23.
The agreed tax illustrates the financial hardships the country is facing and a lack of even an easy solution. Such hikes will further, already stubbornly high inflation at over 25 percent, increase the burden on business and add to the restraints on economic growth. Yet the country needs to plug the tax holes left by unbudgeted subsidies on retail prices just a little over six months back.
The enhanced tax will certainly put a dent into consumer budgets and will continue to restrain consumption in the months ahead via higher inflation.
Pakistan on Tuesday sent back an agreed LoI to the IMF, requesting the board of Washington-based lender to release two tranches worth $1.17 billion and an additional one billion dollars along with a year’s extension in the bailout loan facility.
The IMF on Wednesday confirmed that its executive board is scheduled to hold a meeting on August 29 in Washington D.C to consider Pakistan’s request.
“The IMF’s Executive Board meeting for combined seventh and eighth reviews under the Extended Fund Facility (EFF) has been set for August 29,” the IMF’s Resident Chief in Pakistan Esther Perez Ruiz said in a statement.
The board review would pave the way for the release of the much-awaited loan tranches that had been on hold since earlier this year. The IMF and Pakistan reached a staff-level agreement on the combined reviews of the bailout in July.
Three years ago, the Pakistan government under Prime Minister Imran Khan had inked a 39-month $6 billion programme with the IMF. The present coalition government had sought an additional one billion dollars and a year’s extension in the facility, to which the IMF agreed.
Pakistan entered the IMF programme in 2019, but only half the funds have been disbursed to date as Islamabad has struggled to keep targets on track.
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