The budget for FY2024-25 is expected soon, but fear is already palpable. People are anxious that the common man’s burden won’t be reduced and might even increase.
The IMF is in talks with the government for a new tax package, which could lead to higher sales tax, petroleum levies, and gas prices.
The IMF team has returned from Islamabad after two weeks of discussions, and while the government assures a staff-level agreement, the IMF remains silent about approval or disapproval. This silence fuels concerns that measures to limit the fiscal deficit could lead to increased taxes and levies, making petrol and other products more expensive. Changes in capital gains tax and GST rates are also possible, along with new taxes on property transactions and agricultural income.
Additionally, modifications to capital gains tax and GST rates are likely. The government may also introduce new taxes on property sales and agricultural income through legal amendments. The IMF is stressing the importance of political stability, which raises questions about whether parliamentary parties can reach a consensus on the next IMF agreement. To reassure the IMF, a written commitment from political parties may be required. Let’s hope the current government doesn’t repeat its usual excuse – ‘If certain conditions are relaxed or changed, it will be a relief’ – and instead takes concrete steps to address the economic challenges.
The IMF has long been aware of Pakistan’s economic struggles and wants structural changes to tackle the crisis. The current economic structure is unsustainable, with a heavy burden of foreign loan repayments and interest. Tax cuts for the corporate sector and industry have added to the problem. The government needs to reduce losses by removing subsidies from sick institutions and organizations. However, the government’s priority seems to be maintaining the status quo, even if it means continued hardship for the common man.
The state’s biggest burden is repaying foreign loans and interest, estimated to be around seventy trillion rupees (twenty billion dollars) this year and possibly ninety trillion rupees (twenty-five billion dollars) next year. Tax cuts and preferential treatments in the corporate sector and industry have added to the problem.
Capacity charges given to electricity producers are another significant burden. To address these issues, the government must prioritize public interests overruling class interests and reduce losses by removing subsidies and inefficiencies. This could save up to two trillion rupees and lighten the burden on the common man. However, the government’s approach so far suggests a preference for maintaining the current state of affairs, even if it means continued hardship for the people.
Disclaimer: The views expressed here are solely the author’s and do not necessarily reflect the opinions and beliefs of ARYNews or its management.
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