Dar says no plan to impose new taxes on agriculture, construction sectors

Finance Minister Ishaq Dar dismissed on Friday reports suggesting that the government intends to impose any new tax on the construction and agriculture sectors as part of its commitments made with the International Monetary Fund (IMF).

“I want to categorically state that no new tax would be imposed on the agriculture and construction sectors,” said Dar while addressing a National Assembly session. “We have already endured the pain, and met all prior actions of the IMF programme.

“Around a dozen newspapers have published that taxes would be imposed on the construction and agriculture sectors. This is the result of serious misunderstanding.”

The finance minister told the lower house that all documents pertaining to the IMF programme including the Memorandum of Economic and Financial Policies (MEFP) and Letter of Intent (LoI) would be made available on the Ministry of Finance’s website tonight.

His statement comes after it was reported that the government has committed to the IMF to sustainably raise additional revenue by targeting undertaxed sectors such as agriculture and construction, broaden the tax base, and improve progressively.

In the Letter of Intent (LOI) submitted by the government to the IMF, the government also reiterated its commitment not to launch any new tax amnesties or grant further any new tax exemptions in 2023-24 including through the budget or statutory regulatory orders(SROs) without prior National Assembly approval.

Earlier, the IMF staff and Pakistan reached a $3-billion Stand-By Agreement (SBA) for nine months after which the lender’s Executive Board approved the programme on July 12. Pakistan has already received the first tranche of $1.2 billion, inflows that were reflected in the reserves’ data released on Thursday.

“The IMF would disburse $700 million in November after the second review. The remaining $1.1 billion would be disbursed in February after the third review,” Dar said.

“Due to commitments pertaining to foreign debt payments, our national reserves fell to $8 billion. However, the reserves have now increased to $14 billion,” Dar added, referring to the collective figure of foreign exchange reserves held by the central bank as well as commercial banks.

The reserves held by the State Bank of Pakistan (SBP) surged $4.2 billion, clocking in at nearly $8.73 billion as of July 14, data released on Thursday showed.

“During the week ended July 14, 2023, SBP received $2.0 billion from the Kingdom of Saudi Arabia, $1.2 billion from the International Monetary Fund (IMF), and $1.0 billion from the United Arab Emirates (UAE),” the SBP said in a statement.

Total liquid foreign reserves held by the country stood at $14.07 billion.

Dar said the government intends to maintain the position to a level similar to what it inherited at the start of its tenure.

“I would like to share that the SBP, which as per law is responsible for controlling inflation, has worked out that in the coming two years, the inflation rate in Pakistan would decrease to 7% if the current government’s policies continue.

“This is good news for the country,” he said while reiterating that a “charter of economy” should be inked by the stakeholders.