How cash-strapped Pakistan is dealing with economic crisis?

Forced with an imminent economic meltdown and possible bankruptcy, Pakistan has decided to impose more taxes on its citizens.

This is part of the Shehbaz Sharif government's efforts to unlock the next tranche of $6.5 billion loan facility from the International Monetary Fund (IMF).

Further, the cash-strapped Pakistan has been forced to take the extreme step to stop its economy from spiraling down further.

Pakistan has decided to increase tax on luxury goods and services, raise petrol prices, etc.

High tax

Pakistan unanimously approved the government's Finance (Supplementary) Bill 2023 or 'mini-budget', a move for seeking a $6.5 billion tranche of the IMF loan.

According to the bill, sales tax has gone up from 17% to 25% on imports ranging from cars and household appliances to chocolates and cosmetics. People will also have to pay more for business-class air travel, wedding halls, mobile phones, and sunglasses. A general sales tax was raised from 17 to 18 percent.

Ministers to fly in economy class

Shehbaz Sharif has asked his ministers and advisers to fly economy class, forgo luxury cars and their salaries as part of an austerity drive that will save the government 200 billion rupees a year.

All federal ministers and government offices in Pakistan have been directed to reduce expenditure by 15% and he had also asked his ministers along with advisers to forgo salaries, allowances, luxury cars, foreign trips, and business class travel.

Pak army hit by economic crisis

Pakistan's ongoing economic crisis has also hit its Army. According to News18 report, the army was not able to feed soldiers 'two times properly' amid decades-high inflation and cuts in special funds.

"We have already cut the soldiers' food fund, which was doubled and approved by General Raheel Sharif during Operation Zarb-e-Azb in 2014," the source was quoted as saying by News18.

Pakistan getting China's support

Pakistan's all-weather friend China has extended help to Islamabad with a new $700 million loan to help shore up its foreign exchange reserves.

The credit facility, made through the state-owned China Development Bank will boost Pakistan's forex reserves by about 20% and comes as the country is thrashing out a deal with the IMF to unlock funds from a $6.5 billion bailout.