Pakistan to ban govt officials from buying new cars to secure IMF bailout

Pakistan’s Finance Minister, Miftah Ismail on Friday said that the government would hike taxes on the wealthy and prohibit government officials from purchasing new cars, citing pressure to reduce the fiscal deficit and receive bailout funds from the International Monetary Fund (IMF).

The 220 million-strong country is in the midst of a balance-of-payments crisis, with foreign reserves sliding below $10 billion, just enough to cover 45 days of imports, and growing current account and budget deficits.

Ismail announced the budget for the fiscal year 2022/23, which begins in July, saying it will boost taxes on the wealthy, prohibit automobile imports, and prohibit government officials from purchasing new vehicles. It was unclear if the prohibition applied just to official vehicles or those for personal use.

‘We have started difficult decisions… but it is not the end of taking difficult decisions’, Ismail said.

Pakistan had deviated from measures approved in the previous review under the multinational agency’s Extended Fund Facility programme, and the IMF had requested the South Asian country to rectify its rising budget and current account deficits before issuing a rescue package.

Ismail stated that the government will combat tax cheating in order to boost revenue to 7 trillion Pakistani rupees ($34.65 billion) and reduce the deficit in 2022/23.

Ismail said the government will aim for a fiscal deficit of 4.9 percent of gross domestic product in 2022/23, down from 8.6 percent this year. He added that the government’s goal for privatisation is to raise 96 billion Pakistani rupees.

The government has already taken one of the most important measures towards achieving the IMF’s terms, removing expensive fuel subsidies, by raising fuel prices by 40%. Ismail stated that the government’s goal for economic growth in 2022/23 is 5 percent, down from 5.97 percent in the current fiscal year, which ends on June 30. For the fiscal year 2022/23, the government set a total expenditure goal of 9.5 trillion Pakistani rupees. Inflation is likely to average roughly 11.5 percent in 2022/23.