Pakistan’s new coalition government unveiled a new budget where it will increase taxes for the rich, reduce tax leakages and monetize government assets. From July 1, the government will impose a 2% additional tax on individuals having income more than PKR 30mn ($150k). Pakistan has set a target to raise PKR 96bn ($480mn) from the privatization of assets. Government officials are also banned from buying new cars in order to reduce fuel consumption. The government expects that preventing tax evasion would raise revenues by 20% to PKR 7tn ($34.65bn) and target a fiscal deficit of 4.9% of GDP for the new financial year vs. 8.6% of GDP in the year gone by. With these measures, Pakistan seeks a bailout package from IMF. However, a day after unveiling the budget, Pakistan’s finance minister indicated that IMF has expressed concerns about the higher fiscal deficit, fuel subsidies, and the need to raise more direct taxes. Pakistan is in need of funds as its foreign reserves have dwindled below $10bn, sufficient to cover only 45 days of imports.

Pakistan’s dollar bonds were trading marginally higher with its 7.875% 2036s up over 0.2 points to 63.16 yielding 13.96%.

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