Pakistan’s Finance Minister Remains Committed to New Retail Sector Taxes, Reports Reuters

ISLAMABAD (Reuters) – Pakistan’s finance minister reaffirmed on Tuesday the government’s commitment to implement new taxes on the retail sector, despite threats of strikes, as part of efforts to secure approval for a $7-billion loan from the International Monetary Fund (IMF).

These taxes, designed to meet ambitious revenue targets outlined in a recent budget, have faced significant public opposition since their introduction. Finance Minister Muhammad Aurangzeb emphasized during a televised address that the tax measures would not be rescinded and called on wholesalers, distributors, and retailers to support the economy.

This statement follows a nationwide strike by retailers the previous week, who protested against the new tax regime and rising electricity costs. This strike is part of a broader wave of protests experienced over the past few months against increased tariffs, additional taxes, and overall inflation.

Although Muhammad Sharjeel Goplani, chairman of the All-City Tajir Ittehad Association, had threatened to initiate an indefinite strike if their demands were not addressed, no further actions have been announced since that time.

Aurangzeb mentioned that the approval from the IMF board was nearing completion after previous indications that it would arrive in September. On the same day, Prime Minister Shehbaz Sharif stated that the government is working diligently to fulfill IMF conditions and to finalize a loan program, which he hopes will be the last for the country.

The approval from the Fund’s board is contingent upon confirmation of financial assurances from both development and bilateral partners for Pakistan. Reports suggest that the approval has been delayed due to insufficient additional financing and outstanding energy sector subsidies announced by both the Punjab province and the federal government.

In response to queries, Punjab’s information minister, Azma Bukhari, noted that there had been no communication from the federal government or the IMF regarding an electricity subsidy and that no formal statement had been issued by the Fund.

The IMF, along with the finance ministry and the power ministry, did not immediately respond to requests for comments.

Addressing ongoing concerns, reining in unresolved debts across Pakistan’s energy sector remains a key priority for the IMF. The organization concluded a $3-billion bailout in April, which resulted in increased tariffs affecting the lower and middle classes, leading to a reduction in household energy usage for the first time in 16 years.

Moody’s recently upgraded Pakistan’s credit rating to Caa2, considering the increased certainty regarding external financing following the IMF staff-level agreement and anticipates board approval in the coming weeks.