Pakistan is inching closer to reviving a $6.5 billion bailout from the International Monetary Fund after the parliament approved on Monday the plan to roll out higher taxes.
(Bloomberg) — Pakistan is inching closer to reviving a $6.5 billion bailout from the International Monetary Fund after the parliament approved on Monday the plan to roll out higher taxes.
A bill that will increase the general levy to 18% from 17% and boost tax on imports of luxury items such as mobile phones to 25% from 17% was approved by the parliament. The government had raised energy prices and let the currency weaken after the IMF called on Pakistan to scrap subsidies and enable market-determined exchange rate.
Almost all of IMF’s conditions have now been met, said Zubair Ghulam Hussain, chief executive officer at Insight Securities Pvt, adding that a staff-level agreement can be announced within days. A key item remaining, said Hussain, is further tightening of monetary policy.
State Bank of Pakistan has raised the benchmark rate by 725 basis points since the start of 2022 to contain inflation that quickened to a 48-year high in January. SBP is scheduled to hold its next policy review on March 16.Â
What Bloomberg Economics Says…
Pakistan’s inflation is poised to leap above 30% for the first time on record as soon as February. Supply disruptions caused by flooding, and food shortages due to a scarcity of dollars to pay for sufficient imports have driven up prices. Now, steps the government has taken to fulfill IMF aid terms are about to hit consumer prices with full force.
—Ankur Shukla, India economist
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