Pakistan in bailout bid raises natural gas taxes

Pakistan in bailout bid raises natural gas taxes

Pakistan in bailout bid raises natural gas taxes

Cash-strapped Pakistan sharply increased taxes on natural gas on Feb. 14 to comply with a long-stalled financial bailout, and both industrial and everyday consumers were expected to feel the pain.

The government’s bid to revive a $6 billion bailout from the International Monetary Fund (IMF) led it to hike taxes on natural gas for domestic and industrial consumers to 16 percent to from 12 percent, shocking many Pakistanis who already are struggling. A similar increase in the price of electricity is expected to be announced this week.

“The prices of cooking oil and all food items have doubled in the past less than one year, but there has not been any increase in our income,” said Zameen Gul, 32, a father of three who works for a construction company in Peshawar. “I don’t know how we are going to survive.”

Pakistan is struggling with instability stemming from an economic crisis, last summer’s devastating floods and a recent surge in violence. A critical $1.2 billion portion of the 2019 bailout has been stalled since December, with the IMF urging Pakistan to raise more cash.

The tax hike on natural gas on Feb. 14 is likely to further increase the cost of production and an increase in already spiraling inflation, experts said.

“Pakistan’s economy is currently like a rudderless ship, which is heading for a crash,” said Ashfaq Ahmad, a Pakistani economist who has advised the government in the past.

Ahmad has been a critic of seeking bailouts from the IMF, but he said in these circumstances Pakistan had no other option.

“The government will have to impose new taxes and poor people will pay a heavy price for the bad policies of past governments which mostly relied on the IMF loans,” he told The Associated Press.