ISLAMABAD: Cash-strapped Pakistan will impose new taxes of 170 billion rupees this month in a bid for a massive bailout, officials and analysts said on Monday, even as they warned the new taxes could accelerate the country’s spiralling inflation.
The dire outlook from economists and political analysts comes after the International Monetary Fund delayed the release of a crucial USD 1.1 billion portion of a 2019 deal worth USD 6 billion, on hold since December over Pakistan’s failure to meet the terms. The latest round of the talks between Pakistan and the IMF concluded on Friday with the fund recommending steps including imposing new taxes.
“The imposition of more taxes means tough days are ahead for the majority of the people in Pakistan who are already facing higher food and energy costs, but there is no other way out if Pakistan needs the IMF loans, and Pakistan desperately needs it,” said Ehtisham-ul-Haq, a veteran economist.
The stalemate in talks between IMF and Pakistan was seen as a blow to the government of Prime Minister Shahbaz Sharif, who is struggling to avoid a default amid a worsening economic crisis and a surge in militant violence. Pakistan already is struggling with the recovery from record-breaking floods, which killed 1,739 people in summer 2022 and destroyed 2 million homes.
In January, dozens of countries and international institutions at a UN-backed conference in Geneva pledged more than USD 9 billion to help Pakistan recover and rebuild from devastating summer floods, but economists and Pakistani officials say those funds will be given for the projects, and not in cash.
Since then, Pakistani Finance Minister Ishaq Dar has said that his experts were preparing to impose additional taxes and slash subsidies on electricity, gas and more to meet the deal’s terms.