ISLAMABAD (AP) – Cash-strapped, nuclear-armed Pakistan will impose new taxes of 170 billion rupees this month in a massive bailout attempt.
The dire outlook for economists and political analysts comes after the International Monetary Fund delayed the release of a crucial $1.1 billion chunk of a $6 billion 2019 deal, put on hold since December due to Pakistan’s failure to comply. the terms. The latest round of talks between Pakistan and the IMF concluded last week, with the fund recommending measures including the imposition of new taxes.
“The imposition of more taxes means difficult days ahead for most people in Pakistan, who are already facing higher food and energy costs, but there is no way out if Pakistan needs the IMF loans, and Pakistan needs them. desperately from them,” he said. said Ehtisham-ul-Haq, a veteran economist.
The stalemate in talks between the IMF and Pakistan was seen as a blow to Prime Minister Shahbaz Sharif’s government, which is struggling to avoid a default amid an economic crisis that is worsening amid a wave of militant violence. Pakistan is already struggling to recover from record floods that killed 1,739 people last summer and destroyed 2 million homes.
Last month, dozens of countries and international institutions at a UN-backed conference in Geneva pledged more than $9 billion to help Pakistan recover and rebuild from devastating summer floods, but economists and Pakistani officials say those funds will be donated to the projects, not in cash.
Since then, Pakistani Finance Minister Ishaq Dar has said his experts were preparing to impose additional taxes and cut electricity, gas and other subsidies to meet the terms of the deal.
Haq, the economist, said Pakistan’s 26% inflation rate will jump to 40% after new taxes are imposed. But, he said in an interview, “Life will become more difficult for the common man if Pakistan fails to resume the IMF bailout without further delay.”
Officials say several friendly countries including China, Saudi Arabia and the United Arab Emirates assured Sharif’s government they would help Islamabad financially – but also wanted Pakistan to complete the 2019 IMF programme.
Imtiaz Gul, a senior political analyst for Pakistan, said Sharif’s government was likely to raise taxes for those who already pay them. “We need to broaden the tax base,” he said, but raising taxes “will cause the prices of all essentials to rise.”
The government insists it will impose new taxes so that the poor are not affected. The new taxes will be levied on those who can afford to pay additional taxes to save the economy, the government said.
Pakistan’s foreign exchange reserves have fallen to just over $2 billion. This is just enough to pay for imports for 10 days. Officials say Pakistan’s talks with the IMF will resume virtually on Monday or Tuesday. Sharif warned last week that Pakistan would struggle to meet IMF conditions.
Sharif’s predecessor, Imran Khan, now leader of the opposition, since being ousted over lack of confidence in parliament in April, has warned that Pakistan could face a situation similar to that of Sri Lanka because of the deepening economic crisis. He has publicly warned that Pakistan could be blackmailed by the world community over the country’s nuclear program if Pakistan defaults in the near future.
Khan insists his government was overthrown by a US conspiracy, a charge Washington denies.