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HomeBusinessTrade industry to resist IMF pressure to raise GST to 18 percent...

Trade industry to resist IMF pressure to raise GST to 18 percentTAZAA News

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ISLAMABAD- As the International Monetary Fund (IMF) urges the government to raise the general sales tax rate to at least 18 percent, the Business Council of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) (BMP) has declared such a devastating and outrageous move because the cost of servicing the country’s debt could rise to an alarming 5.2 trillion rupees, with inflation rising to 29 percent and economic growth slowing to 1.5 percent this year.

Former FPCCI President and BMP Chairman Mian Anjum Nisar stated that the IMF’s demand to consider raising the GST rate from 1 to 18 per cent in the current financial year would be inflationary and a 1 per cent increase would raise the prices of all goods. He added that the increase in inflation and the decrease in economic growth will lead to an increase in unemployment and poverty in the country. He expressed dissatisfaction with the possibility of obtaining 8 billion dollars from capital markets and foreign commercial banks during this difficult time.

He said that the government has already spent 2.56 trillion rupees for debt service during July-December of the current fiscal year. The central bank raised interest rates to 17 percent last month, which may not help curb inflation, but will certainly bleed the budget further. He raised questions about the impact of inflation on the expected increase in electricity prices to reduce the cyclical debt.

The government’s estimate was that due to the further increase in the price of electricity, inflation could rise up to 29 percent. The Pakistan Bureau of Statistics reported that in January, the inflation rate reached 27.6 percent, the highest level in 48 years. An acceleration in the index is likely to spell more misery for businesses and industries that have been struggling to meet rising costs. He asked the government to inform the IMF that due to floods, tight monetary policy, inflation and a less favorable environment, the economic growth rate may fall in the range of 1.5 to 2 percent, which is more than is less. .than the rate of population growth and causing more unemployment in Pakistan.

He said that the agricultural sector will decline, the industrial sector may show nominal growth, but the service sector is likely to grow by around 3 percent. Compared to previous estimates of about 1.5 million new jobs, the government now realizes that the additional jobs in the current fiscal year may not exceed half a million. According to some estimates, as many as two million people enter the job market every year, and the low number of job openings suggests that the unemployment rate in Pakistan will be higher.

The government claimed that it has taken measures to pay off the total external debt of 30 billion dollars in the current fiscal year, because the country’s economic viability is at risk, as its total official foreign exchange reserves have decreased to 3.1 billion dollars.

The government still believed it would raise $1.5 billion from floating Eurobonds, making it part of an external financing plan. Compared to foreign trade loans, which are more than 7 billion dollars in the budget, the Ministry of Finance has seen 6.3 billion dollars this year. The IMF was of the opinion that in the current conditions it is difficult to attract 8 billion dollars from capital markets and foreign commercial banks. There were also questions about whether the government could come up with at least $4 billion to pay off the upcoming debt, excluding transfers. It had hoped to receive a total of $11 billion from multilateral creditors this year, but its realization depended on the revival of the IMF program. So far, the Asian Development Bank has been helping Pakistan heavily, but the World Bank has been watching the IMF. There is also the issue of the low tax-to-GDP ratio, currently estimated at around 8.4 percent in a growing economy. At the previous forecast of 78 trillion rupees, this ratio was 9.6 percent of GDP, which the IMF did not approve.

Meanwhile, total debt servicing costs could rise to 5.3 trillion rupees in the 2022-23 fiscal year, compared to the government’s budget of 3.94 trillion rupees, but revised projections were 1.3 trillion rupees higher than the budget estimate. . The 5.2 trillion rupees would be equivalent to 54 percent of the budget announced last June, and the huge spending projections could prompt the IMF to call for more taxes or other spending cuts to create fiscal space.


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