- Ishaq Dar has “sabotaged IMF agreement”, says ex-finance czar.
- Miftah Ismail also claims IMF doesn’t trust Pakistan now.
- “If Pakistan defaults it will be a grave situation.”
As Pakistan continues to woo the International Monetary Fund (IMF) to secure the much-needed bailout from the global lender, former finance minister Miftah Ismail claimed that the Washington-based lender is “not interested” in giving money to the cash-strapped nation.
Pakistan is now the only South Asian country that’s yet to secure a bailout from the multilateral lender as Sri Lanka clinched financing this week and Bangladesh pushes on with carrying out IMF-mandated reforms.
Pakistan has taken tough measures including increasing taxes and energy prices, and allowing its currency to weaken to restart a $6.5 billion IMF loan package. The funds will offer some relief to a nation still reeling from a dollar shortage that has raised the probability of the economy slipping into a recession ahead of elections this year.
Pakistan Muslim League-Nawaz (PML-N) leader Miftah, while speaking during a session titled ‘Pakistan in the midst of crisis’ organised by a private university in Karachi, said that when he was heading the Ministry of Finance, he spoke to the IMF officials and assured them that Pakistan would not make false statements or violate the agreement; however, when Ishar Dar was sworn in “he sabotaged the agreement”.
He recalled that Pakistan has three times made sovereign commitments and has then gone back on them.
“Now the IMF is not interested in giving money to Pakistan,” he said, emphasising that the Washington-based lender doesn’t trust the government in Islamabad.
‘Petrol subsidy formula not effective’
Regarding the petrol relief subsidy announced by the government on Sunday, Miftah said that he believes this formula would not be effective.
“We provide subsidies on petrol by taking loans,” he said. Since the government announced the petroleum subsidy — which initially amounted to Rs50 per litre amount and was later increased to Rs100 per litre — several red flags were raised as analysts and economic experts have been criticising the move as it may jeopardise the ongoing struggle to convince the IMF board.
IMF’s resident representative for Pakistan Esther Perez Ruiz had also clarified that said the Washington-based lender wasn’t consulted on the government’s plan to raise fuel prices for wealthier motorists to finance a subsidy for lower-income people.
“Fund staff are seeking greater details on the scheme in terms of its operation, cost, targeting, protections against fraud and abuse, and offsetting measures, and will carefully discuss these elements with the authorities,” she said.
This is not the first time petrol price subsidies have been a sticking point for the IMF. The previous government led by former premier Imran Khan had given out petrol subsidies, which stalled the IMF programme last year.
Warning of the risks, Miftah mentioned that if Pakistan defaults it will be a grave situation for the country as people belonging to the rich segment will bear the brunt but the poor people won’t be able to make ends meet.
Bulls Reenter PSX: The KSE-100 Rises More Than 886 Points
As the market surged more than 800 points in the early morning trade, bulls grabbed control at the Pakistan Stock Exchange.
During the first trading session, the benchmark KSE-100 index increased by 886 points to 61,350.48 points.
Pakistan’s steel prices are rising; get the latest figures here
Another increase in steel prices has resulted in higher construction expenses in Pakistan. The economic downturn and continuous shipping delays have resulted in sharp price increases for building supplies, which has an effect on those who are planning to construct homes.
Due to increased manufacturing costs and supply chain interruptions brought on by the Middle East crisis, the price of iron, commonly known as steel rebar, has increased by Rs5,000 per ton. Local and imported steel rebar now costs between Rs240,000 and Rs260,000 per ton as a result of this most recent rise.
The cost of branded iron went from Rs255,000 to Rs260,000 per ton, while the cost of local iron climbed from Rs236,000 to Rs240,000. Furthermore, the cost of scrap or unprocessed iron has increased to Rs160,000 per ton inin the iron and steel markets.
The impact of the skyrocketing steel prices will be exacerbated by any more interruptions in the raw material supply chain. The cost of cement, on the other hand, has somewhat decreased and is at Rs 1,246 per bag.
Up 30% to Rs 5.1 trillion by mid-February, FBR collected
The total increase in domestic taxes has been around 40%, whilst import duties and associated levies increased by 16% between July 2023 and January 2024.
With the recovery of the GDP and increased inspection of FBR collection, the growth in revenues accelerated.
Up to mid-February, FBR receipts increased by 30% to Rs. 5.1 trillion. Nevertheless, decreases in import tariffs over time and, more recently, import license limits implemented by the State Bank of Pakistan (SBP) to manage the country’s balance of payments in the aftermath of foreign exchange shortages, were mostly responsible for the decline in the rise of import taxes.
However, the impact of improvements in import valuation, which resulted in collections of Rs 151 billion, as well as the anti-smuggling campaign, which saw a surge of about 69% in the current fiscal year over the previous one, are also included in the income collected from imports.
The statement said that there was room to improve anti-smuggling operations by considering expanding Baluchistan’s customs force, which now only has 378 anti-smuggling employees out of 20,000 total.
The mobilization of domestic tax income, which accounted for more than 64% of all revenues received in the current fiscal year, was hailed in the statement as a welcome change.
In parallel, the percentage of import duties has decreased to 36% from over 50% just three years prior. The main drivers of this increase in revenue were the several taxes sources. From Rs. 1,751 billion to Rs. 2,447 billion, income tax receipts increased significantly—by 40%.
Banks, the petroleum and oil lubricants (POL) business, the textile industry, the electricity sector, the food industry, and a number of service industries were among the major income tax payers. Up to mid-February, FBR receipts increased by 30% to Rs. 5.1 trillion. Notable rise was also seen in sales tax receipts, which increased by 19% from Rs. 1,480 billion to Rs. 1,766 billion.
POL, the electricity sector, the food sector, the automobile sector, the iron and steel sector, and the chemical sector were important growth drivers.
The amount collected in federal excise taxes increased significantly by 61%, from Rs. 190 billion to Rs. 307 billion.
Taxes on tobacco goods, the cement industry, drinks, airlines, fertilizers, and the automobile sector were the main causes of this increase. The amount collected in customs duties increased by 14%, from Rs. 552 billion to Rs. 629 billion.
The POL, automobile, iron and steel, electronics, and food industries were among the main donors to customs duties.
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