Pakistan passes IMF-backed mid-year budget to raise $1.93 bln

Pakistan's parliament passed a mid-year budget on Thursday that will end exemptions on sales tax as part of fiscal tightening to win funding from the International Monetary Fund (IMF), Finance Minister Shaukat Tarin said.

Pakistan's parliament passed a mid-year budget on Thursday that will end exemptions on sales tax as part of fiscal tightening to win funding from the International Monetary Fund (IMF), Finance Minister Shaukat Tarin said. Ending the tax exemptions would raise 343 billion rupees ($1.93 billion), Tarin said in proceedings of the house after parliamentarians from Prime Minister Imran Khan's party and his allies voted in favour of the finance bill.

Opposition party leaders in parliament said the supplementary budget will trigger a new wave of inflation, which already stands at 12.3%, but Tarin rejected that. Surging food and energy prices have put Khan under increasing pressure in recent months as household bills have caused growing anger among the middle classes, his main support base.

The IMF has made further budgetary tightening a condition for the revival of a stalled $6 billion funding programme and central bank autonomy from Pakistan before the next tranche could be approved. The IMF board was due to meet on Jan. 12 to approve the tranche, but Pakistan had requested to delay it until Islamabad met the IMF conditions.

Tarin also presented a separate bill to give the central bank greater autonomy, including independent powers to control price stability, monetary policy decisions and a guaranteed tenure for its governor. This law when passed will also stop the government from borrowing from the central bank.