IMF’s terrible prescription

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THERE is going to be no respite for inflation-hit masses in the foreseeable future if the Government continues to succumb to the pressure of the International Monetary Fund (IMF), which has again demanded of the Government to jack up Income Tax, Sales Tax and Regulatory Duty (RD) to increase the tax collection target from Rs 5.8 trillion to 6.3 trillion.

The fresh demand came during the ongoing virtual talks in the context of losses incurred on account of non-collection of petroleum levy of over Rs600 billion during the current fiscal year. The IMF also recommended a further increase in the base price of electricity tariff to the tune of Rs1.40 per unit to curtail the surge in circular debt.

This is, indeed, a pathetic state of affairs as the annual budget is prepared under the watchful eyes of the Fund and then come a series of mini budgets under arms-twisting of the lenders, making life of the people miserable.

The demand for an increase in income and sales tax as well as regulatory duty is surely aimed at pushing the cost of production up, which would, in turn, make our products uncompetitive in the global market despite massive devaluation of the rupee.

While any increase in the rate of income tax would be negation of the oft-repeated pledges of the government leadership not to burden the existing tax-payers, the increase in ST and RD would result in fresh wave of price-hike.

The imposition of RD on unnecessary imports can help check the widening trade deficit but increase of duty on raw material would make things worse as for as production cost and inflation are concerned.

The situation would compound if the electricity tariff is also enhanced over and above several irrational upward revisions in the past.

Already, the Bank in its latest report, “The latest South Asia Economic Focus titled Shifting Gears:
Digitization and Services-Led Development”, has projected that the GDP growth rate in Pakistan would be less than the estimated 3.5% while inflation is projected to edge up with expected domestic energy tariff hikes and higher oil and commodity prices.

People desperately look towards the Government in the backdrop of promises that the year 2021 would be a year of relief but there is no silver lining on the horizon as, instead of taking measures to curb inflation, the Government has now started defending it claiming it was a global phenomenon.

This is also borne out by media reports that during the ruling party’s core committee meeting on Thursday, Prime Minister Imran Khan expressed the opinion that inflation was still lower than in many countries, directing the PTI leaders to apprise the voters in their constituencies about the high prices of food items in the international market.

It is to be seen how the Government sells this notion in the last two years of its rule and what would be the impact of its inability to check price-hike effectively on its performance in the next general election.

However, it is a foregone conclusion that the terrible prescription being proposed by the IMF would have a negative impact on the financial health of the individuals as well as overall economic conditions of the country.

 

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