Pepsi, Coke's $200 million plan to bring dollars into Pakistan in danger?
Recently, Pepsi and Coke, in a meeting with Pakistan's finance ministry, assured that they will obtain loans worth around USD 200 million from their parent companies to bring dollars into Pakistan
Islamabad: In a major setback for the Shehbaz Sharif-led government in Pakistan amid the ongoing economic crisis in the country, the beverage industry has warned the Federal Board of Revenue (FBR) that the proposed four per cent federal excise duty (FED), popularly known as the “sugar tax,” would not just take the beverage prices up, but will also put the crucial USD 200 million investments plan by two key carbonated soft-drink companies in danger.
Recently, Pepsi and Coke, in a meeting with Pakistan’s finance ministry, assured that they will obtain loans worth around USD 200 million from their parent companies to bring dollars into Pakistan, Dawn reported.
The ministry has agreed that their imports of key parts, equipment as well as components for the “concentrate” can only be made through dollars which they will bring into Pakistan.
Meanwhile, the two renowned brands have even written a joint letter to Prime Minister Shehbaz Sharif highlighting that the proposed four per cent federal excise duty on beverages was unfair as it was being levied upon the carbonated drinks only.
They have also said that the country needs a tax policy that encourages local manufacturing to survive, if not thrive, Dawn reported.
“The combined taxes were high as 30 per cent, including sales tax and FED, and it was the only industry within the food and beverage (F&B) sector paying the FED,” the letter added.
It was further highlighted that aerated waters industry was the only one among various water-consuming industries paying “water charges”. Also, within F&B sector, it is the only industry where the imposition of a health levy has been suggested. “Further implementing the sugar tax on top of high FED will lead to double taxation and towards a total collapse of the legitimate taxpaying manufacturers in the beverage industry,” the companies stated.
Pakistan Economic Crisis
Amid severe economic crisis in Pakistan, the International Monetary Fund (IMF) mission led by Nathan Porter on January 31 began talks with the country for the ninth review of the USD 7 billion assistance package. Shehbaz Sharif on Friday said the IMF was giving a “tough time” to the government during talks for the restoration of the loan.
Talking about the security situation, Sharif highlighted the economic challenges faced by the country and said that the “situation is in front of the entire nation”.
“As I speak, the IMF delegation is in Islamabad and they are giving Finance Minister Ishaq Dar and his team a tough time,” he said.
He further claimed that the IMF conditions that the country has to meet are “beyond imagination”, but it is mandatory to fulfil the demands of the fund.
Pakistan’s forex exchange reserves hit 10-year low
Pakistan’s central bank has said that its foreign exchange reserves have dropped by 16.1 per cent to USD 3.09 billion at the end of the last fiscal week, the lowest in nearly 10 years. The IMF after a successful ninth review would provide over USD 1.1 billion and the gesture would open venues for bilateral loans from different friendly countries and multilateral institutions.
Pakistan has already agreed to increase petroleum prices and allowed a market base exchange rate but that seems too little and too late. The fund wants more measures to increase revenues.
(With inputs from PTI)
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