During ongoing loan negotiations, the International Monetary Fund (IMF) has demanded an 18% General Sales Tax (GST) on petroleum products from Pakistan. The government, however, is considering imposing a carbon levy on petroleum next year as an alternative to the GST.
As talks between Pakistan and the IMF near conclusion, sources indicate that the IMF has set several preconditions for a staff-level agreement. These include implementing new taxes, raising electricity and gas tariffs, and comprehensive energy sector reforms.
Negotiations have been challenging, with further discussions scheduled today involving the IMF mission, the Finance Ministry, and Federal Board of Revenue (FBR) officials. The outcome will be crucial for securing a new bailout package.
Currently, the government charges a Rs60 per litre petroleum levy, projected to generate Rs2,295 billion in revenue over two years, with Rs1,080 billion expected in the next financial year and Rs1,215 billion the following year.
Despite intense negotiations, it seems likely that a new bailout package will be renegotiated after presenting a new budget in line with IMF conditions.
Recently, policy-level talks focused on economic reforms in the gas sector, including tariff adjustments and measures to reduce revolving debt. A significant increase in gas tariffs, potentially starting in August, could impact various sectors but will exempt commercial roti tandoors to ensure affordable food. Strategies to address circular debt in the gas sector, including specific rate increases for fertilizer factories, have also been presented to the IMF.
