Islamabad, July 18, 2025: The International Monetary Fund (IMF) has rejected Pakistan’s suggestion to introduce a 1 percent water storage levy on all taxable commodities to support large-scale dam initiatives. Instead, it recommended increasing the 18 percent general sales tax (GST) rate if further development funding is required.
The federal government intended to implement the surcharge to support the construction of Diamer-Bhasha, Mohmand, and a proposed Chenab dam.
According to Express Tribune, the IMF raised objections regarding legal issues, governance structure, and budgetary flexibility, and it opposed the idea of allowing WAPDA to control the revenue stream.
The Fund emphasized that any extra financing should either be sourced by reallocating funds within the Rs. 1 trillion development budget or through an increase in the sales tax rate.
Updated estimates put the cost of the Diamer-Bhasha dam at over Rs. 1.1 trillion, a significant initial from its initial Rs. 479 billion budget.
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Even based on the original estimate, Rs. 365 billion remains unfunded, while only Rs. 25 billion has been allocated for this year. For the Mohmand dam, which had an initial approval of Rs. 310 billion, at least Rs. 173 billion is still required, though only Rs. 35.7 billion has been set aside so far.
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The upcoming Chenab dam is estimated to cost Rs. 220 billion. Altogether, these three projects require an additional Rs. 1.35 trillion.
As an alternative to introducing new taxes, the government is considering amending the GIDC Act to reallocate over Rs. 400 billion in unspent collections toward dam building efforts.
