Why are medicine prices skyrocketing in Pakistan?
The prices of medicines in Pakistan are expected to rise sharply following the government’s decision to impose a sales tax of up to 18 percent, as reported by ARY News on Tuesday.
According to officials from the Ministry of National Health Services, Regulations and Coordination (NHS, R&C), the government has proposed the 18 percent sales tax on medicines in the upcoming budget, following recommendations from the International Monetary Fund (IMF).
This proposal is part of a broader set of economic reforms required by the IMF to secure a new bailout package for Pakistan.
Why are medicine prices skyrocketing in Pakistan?
Experts warn that the imposition of this tax could lead to a significant increase in medicine prices, making essential drugs unaffordable for many.
They caution that pharmaceutical companies may exploit the situation to set prices at their discretion, exacerbating the financial strain on consumers.
Context of IMF Recommendations:
The IMF’s recommendation for taxing medicines comes at a time when the previous caretaker government had already deregulated medicine prices, removing price controls and allowing market dynamics to determine costs.
This new tax is expected to compound the difficulties faced by consumers in accessing affordable healthcare.
Broader Economic Measures and Subsidy Reductions:
In addition to the sales tax on medicines, the IMF has demanded several stringent economic measures as conditions for the new loan program.
These include taxing monthly pensions exceeding Rs 100,000, reducing subsidies from Rs 1,550 billion to Rs 800 billion, and increasing electricity prices by 10-12 percent.
The government is also expected to document retail sales to prevent tax evasion.
No Alternative to IMF Loan Program:
Sources indicate that Pakistan has no viable alternative to the IMF loan program, making the implementation of these reforms crucial for securing the financial assistance needed to stabilize the economy.
The proposed measures highlight the tough economic choices facing the government as it navigates through this challenging period.
The forthcoming policy-level talks between Pakistan and the IMF are set to address these and other conditions of the bailout package, which are vital for the country’s economic recovery and stability.
