The IMF is pressuring Pakistan to cancel the aid package offered by former Prime Minister Imran Khan. According to reports, the demands include a rise in power and fuel prices, a reduction in subsidies, the end of the tax amnesty program for the industrial sector, and an increase in tax rates to resurrect the loan program.
Pakistan and the International Monetary Fund (IMF) are now holding negotiations as part of the loan program’s seventh review; if the talks go well, the IMF will release a $1 billion tranche.
According to sources, the IMF team is pressuring Pakistan to make difficult decisions for the coalition government. The cancellation of the assistance package offered by former Prime Minister Imran Khan on February 28 is one of the principal IMF conditions. The former prime minister had promised to keep petroleum prices steady until June 2022 as part of the plan.
According to official estimates, the government must pay a monthly subsidy of Rs. 70 billion to sustain the pricing of petroleum goods. The administration has also eliminated the sales tax on all petroleum goods, which was previously the primary source of revenue. The former premier had also promised to make electricity more affordable by providing a Rs. 5 per unit subsidy.
According to sources, the IMF wants tariffs for electricity, petroleum goods, and gas to be raised in order to revive the loan program. In Pakistan, the IMF also wants to implement a system in which all cabinet members, both elected and non-elected, must declare their holdings.
The international lender is also pressuring the new coalition government to raise income tax rates, which the previous government refused to do.
The Pakistani delegation, lead by Finance Minister Miftah Ismail, will try to persuade the IMF officials to modify the stringent requirements for the loan program’s resumption.
Experts fear that if the government boosts oil prices in response to IMF demands, the country will see a new wave of inflation. Pakistan’s talks with the IMF are expected to end on April 24.