Govt assures IMF new taxes, power tariff hike from April 1
ISLAMABAD: The government has assured the International Monetary Fund (IMF) that it would impose a 15 percent flood surcharge and 2.5 percent special excise duty in addition to increasing power tariff by 2 percent from April 1.
Sources said that these measures have been agreed with the fund to contain the fiscal deficit to around 5 percent for the current fiscal year. The government will likely seek an approval from parliament to implement the proposed fiscal measures instead of introducing them through a presidential ordinance, which may prove controversial.
The 15 percent flood surcharge and 2.5 percent special excise duty would generate Rs 26 billion. The government has also proposed withdrawal of exemptions and special duty to various sectors as part of the fiscal reforms. Sources in the Finance Ministry said that the proposal for 2 percent monthly increase in the power tariff for the remaining months of current fiscal year has been finalised and would be implemented after the approval of political leadership.
They said that an increase in power tariff, which had been on hold since December 2010, was inevitable to contain fiscal deficit to a level acceptable to the IMF and for revival of Standby Agreement with the agency to qualify for budgetary support from bilateral and multilateral lenders. The subsidy for the power sector was set at Rs 30 billion for fiscal year 2010-11 but was subsequently increased to Rs 67 billion. The increase in power tariff may be announced in the current month.
An official of the Federal Board of Revenue (FBR), on condition of anonymity, told media that the IMF was assured that the 2 percent increase in power tariff, flood surcharge and special excise duty would be implemented from April 1. The official said that fiscal deficit and revenue collection plan for the current and next fiscal year would be discussed with the IMF on Thursday (today).
The fiscal deficit, the official said, could cross 8.4 percent in the current fiscal year if cuts in expenditure are not made. The proposed savings from cut in expenditure, he said, is Rs 10 billion from flood relief assistance, Rs 20 billion from current expenditure, Rs 35 billion from the Benazir Income Support Programme and Rs 20 billion from allocation for internally displaced persons. A slash in Public Sector Development Programme would save Rs 100 billion, while provinces have been asked to provide Rs 100 billion.
Source: Daily Times