The demon of domestic debt

Life for ordinary Pakistanis may continue to be challenging not only through this fiscal year but for the next two years as well due to the high levels of taxes that will remain in place and the additional services that will be brought into the tax net during these three years to meet the Internal Monetary Fund’s (IMF) demands. The recently negotiated $7 billion IMF loan package, whose final approval by the IMF Executive Board is awaited, will be disbursed in 37 months. The terms of this loan require Pakistan’s provinces to switch over from the “positive” to “negative” list of services to levy sales tax. Sindh, Punjab, KP and Balochistan have already started working on this plan for implementation in the next fiscal year beginning in July 2025, according to a Dawn report. Switching over from the positive to negative list means only a few services will enjoy exemption from sales tax, and the tax will be applicable to all other services. Currently, sales tax is collected only on some services and all other services are exempted.