Pakistan: Parliament Fails to Pass Bill to Unlock IMF Funds

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Facts

  • On Friday, Pakistan's National Assembly — the lower house of its parliament — adjourned without passing a crucial tax bill to unlock $1.1B in financial aid from the International Monetary Fund (IMF). The session will continue on Monday evening.1
  • The legislation, tabled by the government and presented to parliament on Wednesday, seeks to generate 170B rupees ($643M) by raising the general sales tax from 17% to 18%. It also follows moves earlier this week that saw the government raise the price of gas and fuel.2
  • The tax-loaded finance bill aims to fulfill the IMF’s required reform to increase revenue before it releases $1.1B – originally due in November 2022 – out of the $7B bailout deal agreed upon in 2019.3
  • The proposed measure follows a visit to Pakistan from an IMF delegation late last month that saw the government and the financial agency's representatives fail to sign an agreement after 10 days of negotiations.2
  • The country did secure $1.17B last August after the IMF approved the seventh and eighth review of the package, but the delayed ninth review has hurt Pakistan’s economy as foreign reserves dwindle to $2.9B.2
  • The IMF has given a deadline of March 1 to implement the required reforms that the Finance (Supplementary) Bill, 2023 — more generally known as the mini-budget — seeks to meet.4

Sources: 1The week, 2Al Jazeera, 3The hindu and 4Dawn.com.

Narratives

  • Narrative A, as provided by Business today. The government's erratic policies have reinforced the country's structural economic problems. The country is struggling with high inflation and balance-of-payments crises, last summer's devastating floods, and a recent surge in terror attacks. Now, the government is looking for a bailout on the backs of its citizens while those responsible remain unscathed.
  • Narrative B, as provided by News18. Despite the severity of the challenges, the government's mini-budget is enough to unlock the crucial IMF loan tranche and help Pakistan's economy bounce back. While the bill will raise taxes and costs for some people, the government is doing its best to prepare a proposal and secure the necessary funds to keep the nation from collapsing.