Pakistan raised a tax on petroleum as the government takes steps to meet International Monetary Fund (IMF) expectations before the financial agency releases the next tranche of a loan package, reports Bloomberg.
The petroleum development levy was increased by Rs10 to Rs70 a litre, according to a notification the Oil and Gas Regularity Authority posted on its website. The IMF said on Saturday that Pakistan is making progress toward receiving the second $1 billion instalment of the $7 billion loan agreement it secured last year.
Pakistan increased the levy to bridge falling tax revenue amid the IMF review talks, Mohammad Sohail, chief executive officer at Topline Securities Ltd., said.Nathan Porter, head of the IMF’s mission to Pakistan, said the “program implementation has been strong” after his team visited Islamabad and Karachi from February 24 to March 14.
Pakistan will be on track to receive the next loan instalment once the fund and the government reach a so-called staff-level agreement. Porter said discussions will continue virtually “over the coming days,” without providing further details on a timeline. IMF financing has been crucial in helping Pakistan recover from a dollar shortage that brought the South Asian nation to the brink of an economic collapse.
To meet the demands of the loan agreement, the government of Prime Minister Shehbaz Sharif has taken several ambitious steps, including approving a law to tax agricultural income and attempting to sell a stake in state-owned Pakistan International Airlines (PIA).
In the past months, foreign exchange reserves have risen, while inflation has cooled, giving the country’s central bank room to support economic growth. Both Moody’s and Fitch upgraded Pakistan’s credit ratings last year.