Pakistan’s cabinet approved a bill to raise 170 billion rupees ($636 million) in taxes, a key condition to secure funds from the International Monetary Fund needed to avoid a default.
(Bloomberg) — Pakistan’s cabinet approved a bill to raise 170 billion rupees ($636 million) in taxes, a key condition to secure funds from the International Monetary Fund needed to avoid a default.
Prime Minister Shehbaz Sharif’s government will present the bill to parliament for approval on Wednesday, his office said in a statement. The nation also approved an increase in gas and electricity prices, without disclosing how much they would rise.
Pakistan and the IMF have had prolonged talks on steps needed to revive a $6.5 billion loan program after failing to reach a deal last week when officials from the global monetary body visited the country. A deal with the IMF will likely unlock funding of billions of dollars pledged by friendly countries and international lenders to Pakistan.
Pakistan’s economic situation has gone from bad to worse in recent months. Its foreign reserves have dropped to $3 billion, enough to cover a few weeks of imports, and shipping containers with billions of dollars worth of imports are stuck at port because of a dollar shortage.
Fitch Ratings on Tuesday downgraded Pakistan’s credit rating deeper into junk, reflecting the country’s deteriorating financial position. Devastating floods in the summer reduced Pakistan’s economic growth forecast by half to about 2% for the fiscal year ending June.
“The IMF’s conditions are likely to prove socially and politically difficult amid a sharp economic slowdown, high inflation, and the devastation wrought by widespread floods last year,” Fitch said.
Pakistan loosened its grip on the rupee last month, sending the currency to a record low against the dollar after a 15% slump in January. The nation’s dollar reserves are forecast to see a modest recovery in the year ending June, while payments will remain high next year, Fitch said.
–With assistance from Khalid Qayum.
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