ISLAMABAD: Pakistan’s parliament on Friday passed the government’s tax heavy finance bill for the coming fiscal year amid an annual inflation projection of up to 13.5 percent for June.

The bill comes ahead of more talks with the IMF for a loan of $6 billion to $8 billion to avert a debt default for Pakistan, the slowest growing economy in South Asia.

As the parliament moved to pass the bill clause by clause, Pakistan’s sovereign dollar bonds slid on Friday, Tradeweb data showed, with the 2031 maturity shedding 1.4 cents to trade at 78.69 cents on the dollar.

Finance Minister Muhammad Aurangzeb moved the finance bill in parliament, which was opened to seek amendments and debate by the ruling alliance led by Prime Minster Shehbaz Sharif and its opposition.

Speaker Sardar Ayaz Sadiq announced passing of the budget in a live TV telecast.

The government presented the national budget on June 12 with a challenging tax revenue target of 13 trillion rupees ($46.66 billion) for the year starting July 1, up about 40 percent from the current year, to strengthen the case for a new rescue deal with the International Monetary Fund (IMF).

The budget is gearing the country toward an era of sustainable and inclusive growth, said a finance ministry report issued on Friday, which projected annual consumer price inflation for June 2024 between 12.5 percent to 13.5 percent, up from 11.8 percent in May.

“The government was implementing various administrative, policy and relief measures to control inflationary pressures,” the report said.

The rise in the tax target is made up of a 48 percent increase in direct taxes and a 35 percent hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by 64 percent.

The tax would increase to 18 percent on textile and leather products as well as mobile phones besides a hike in the tax on capital gains from real estate.

Workers will also get hit with more direct tax on income.

Opposition parties, mainly parliamentarians backed by the jailed former Prime Minister Imran Khan, have rejected the budget, saying it will be highly inflationary.

Pakistan has projected a sharp drop in its fiscal deficit for the new financial year to 5.9 percent of gross domestic product (GDP), from an upwardly revised estimate of 7.4 percent for the current year.

Pakistan’s central bank has also warned of possible inflationary effects from the budget, saying limited progress in structural reforms to broaden the tax base meant increased revenue must come from hiking taxes.

The upcoming year’s growth target has been set at 3.6 percent with inflation projected at 12 percent.