ISLAMABAD: Pakistan’s textile sector will continue to experience economic woes in the shape of high-interest rates, exchange rate depreciation, high power tariffs, increase in raw materials’ cost and suspension of the zero-rating status in FY24 under the IMF program.
The textile sector stated that the government had committed to targeting a general government primary surplus of Rs401 billion for FY24. This is to be achieved through additional tax measures of Rs254 billion, containing spending on the public wage and pensions bill and limiting energy subsidies through the full annual rebasing of power tariffs.
The government has allocated Rs417.7 billion to BISP for FY24 to partially offset the economic impact of the crisis and consolidation measures on vulnerable segments.
The government has committed to a return to a market-determined exchange rate and no formal or informal intervention in the currency market. It has withdrawn a circular to banks on the prioritization of forex allocation for certain types of imports and has further committed to a gradual withdrawal of other forex and import restrictions, and to limit the gap between interbank and open market rates to 1.25 percent.
The State Bank of Pakistan has committed to exercising strict and timely monetary policy to anchor inflation and bring the real policy rate into positive territory, phase-out its role in refinancing schemes, cease forex-related interventions and strengthen its overall autonomy.
Besides, full annual rebasing of power tariffs with effect from July 01 is to be conducted under the updated circular debt management plan. Additional reforms are to be undertaken in the gas sector, including the operationalization of the WACOG gas pricing mechanism.
The program is subject to quarterly reviews scheduled for November 2023 and February 2024. The government is committed to improving the tax-to-GDP ratio to achieve Rs401 billion primary budget surpluses for FY24, including through additional revenue collection of Rs254 billion by increasing taxes. The major contributors to this amount include the petroleum development levy (Rs79 billion), taxes on immovable property (Rs46 billion) and other sources.