ISLAMABAD – As the inflation rate rose to the highest level in two years,the International Monetary Fund is asking Islamabad to raise power tariffsfurther to align energy tariffs with cost recovery.
Reports in local media quoting the staff report of global lender said itdemanded to raise electricity and gas prices following the release of a $1billion tranche under its Extended Fund Facility.
IMF officials stressed that the regular implementation of tariffadjustments in line with established formulas was critical to lendcredibility to the newly-independent energy regulator, halt theaccumulation of arrears and implement the Circular Debt Management Plan(CDMP).
Besides the surge in power tariff, IMF has asked Islamabad to implementpersonal income tax (PIT) reforms, cut in the slab for lifeline consumers,phasing out of refinance schemes, and recapitalization of two private banksahead of the next performance review in April.
Experts suggest that the conditions exist at some point, but the ImranKhan-led government might have preferred to implement them in differentphases.
The incumbent government has agreed to reform personal income tax to changethe existing tax rate structure by reducing the number of rates and incometax brackets (slabs) to simplify the system and increase progressivity, perIMF report.
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It also mentioned that drafting of PIT legislation is on the cards and willbe done by the end of this month. It will be ready to come into effect withthe FY2023 budget.
The new stern directives are likely to burden those who are already payinghefty taxes, but officials hinted at targeting tax evaders.
Recently, the Pakistan Bureau of Statistics reported that the ConsumerPrice Index (CPI)-based inflation rate soared to 13 percent last month. Janwas the fifth consecutive month that the inflation rate constantlyincreased in wake of IMF directives.
