To fulfill IMF conditions, government plans parliamentary approval for ‘mini-budget’ next week

Daily wage labourers sit along the roadside and read a newspaper as they wait to be hired for work a day after the Pakistan government announced the fiscal budget in Peshawar, Pakistan, on June 12, 2021. (AFP/File)

• Finance (Supplementary) Bill 2021 aims to end tax exemptions on nearly 150 items as prior action for revival of IMF loan
• The bill will empower government to level uniform 17 percent General Sales Tax on goods that were taxed at 5 percent or 12 percent rates

ISLAMABAD: Pakistan’s federal government is planning to convene a session of the National Assembly, the lower house of parliament, early next week to hold a debate on and seek approval for a contentious supplementary finance bill, popularly known as the ‘mini budget’, local media reported on Friday.
Early this week, the country’s finance minister Shaukat Tarin presented a finance bill in the Senate as part of the government’s efforts for the revival of a $6 billion International Monetary Fund (IMF) loan program, amid uproar from opposition parties.
“The government is set to convene a National Assembly session on January 10 that would take-up Senate recommendation on the supplementary finance bill which was previously presented in the National Assembly on December 30, 2021,” the PM’s adviser on parliamentary affairs, Babar Awan, told English daily Dawn. 
According to the newspaper, Awan said the government was open to talking with other parties in the house but would not allow opposition to block legislation through disruption.
Pakistan’s finance ministry said on January 2 it was confident to get two important bills approved from parliament by mid-January to fulfill the International Monetary Fund’s (IMF) conditions to revive the stalled $6 billion loan program.
The Finance (Supplementary) Bill 2021, which was presented in the lower house of parliament last month, aims to end tax exemptions on nearly 150 items as a prior action for the revival of the IMF program. It will empower the government to level a uniform 17 percent General Sales Tax (GST) on goods that were taxed at 5 percent or 12 percent rates. The amendment will also enable the government to generate over Rs343 billion in additional revenue.
Shehbaz Sharif, the leader of the opposition in the National Assembly, described the mini-budget as a “death knell” for the country, while PPP chairman Bilawal Bhutto-Zardari called it an “anti-public budget.” 
The measures Pakistan has agreed to meet for the IMF would have a monetary impact of around Rs600 billion, including around Rs350 billion through tax exemption withdrawals and new tax imposition, Rs200 billion through cuts in development funds, and Rs50 billion through other adjustments.
The government has downplayed the opposition’s fears of the mini-budget causing more inflation in Pakistan. Finance minister Shaukat Tarin said new taxes worth only Rs2 billion were being imposed, which would not lead to widespread inflationary pressures.
The IMF executive board will meet on January 12 to decide whether it should revive the stalled loan program, which the two sides entered in 2019 to limit the South Asian nation’s mounting debts and stave off a looming balance-of-payments crisis, in exchange for tough austerity measures. 
Five reviews of the program had been completed by March. The sixth review has been pending since June 2021. The revival of the IMF program would allow the release of over $1 billion loan tranche to Pakistan, which would bring total disbursements to over $3 billion. The IMF program revival would also unlock significant funding from bilateral and multilateral donors.