Back-breaking deal

Already hard-pressed, the masses are in for further financial squeeze. The country’s financial czars have yielded to the IMF’s demand to carry out tight fiscal adjustment in the months ahead that will surely leave a deeply bitter taste of tax increases. According to documents released by the IMF after approval of the modified loan facility by its executive board of directors, Pakistan has made a commitment with the lender of last resort to increase FBR taxes by a whopping Rs1.272 trillion in the coming budget, besides taking other steps to bolster the exchequer.

The tax machinery has been set a herculean task to collect Rs5.963 trillion in the next fiscal year as against Rs4.691 trillion revised target for the current fiscal year. This means a 27% rise in the tax collection target — something which is simply unrealistic given our slow moving economic wheel due, in part, to the raging pandemic.

More troubling news for the general public is that the government has also given an undertaking to the IMF to hike power tariff by about Rs4.97 per unit in the remaining three months of the current fiscal year and to continue making adjustments in the electricity cost next year on monthly, quarterly and annual basis. As if that is not enough, the government has also agreed to keep raising petroleum levy on oil products to the maximum level — Rs30 per litre — this year and next year. This will make a Rs60 billion addition to the government’s earning under this head on top of the budgeted target of Rs450 billion.

Given the sombre state of public finances, the fiscal adjustment needed to lower public debt ratios to more management levels will indeed prove punishing for the common man. Higher electricity bills and a widening general sales tax regime means people will be squeezed even harder, prompting them to tighten the purse-strings. With a rampaging Covid-19 pandemic taking a huge toll on the economy, Islamabad’s negotiators should have made a hard bargain with the international lender and asked it to slim down the reforms being demanded. Fiscal adjustment may be in the interest of the country, but it should not be this abrupt.

Published in The Express Tribune, April 11^th, 2021.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.