• Economic Survey 2020-21 released
ISLAMABAD: Expressing the government’s resolve to consolidate and build on the growth trajectory achieved during the outgoing fiscal year of 3.94 percent, Finance Minister Shaukat Tarin stated that the International Monetary Fund (IMF) has been plainly told that the government cannot afford to burden people with new taxes and in power tariff hikes.
Prime Minister Imran Khan’s “prudent” policies of “smart lock down” as well as incentives to various sectors and businesses during the Covid-19 outbreak helped revive the economy and 3.94 percent GDP growth was achieved on the back of overall better performance of all the sectors of the economy, said Tarin at the launch of the Economic Survey 2020-21 along with other members of the economic team to present the government performance for the outgoing fiscal year, a day before the presentation of the next fiscal year budget by the government.
The finance minister said that the 3.94 percent GDP growth was based on large scale manufacturing growth of nine percent, agriculture sector growth of 2.77 percent as all the four crops other than cotton showed record growth.
Tarin said that record growth in remittances has been a blessing to maintain the current account (C/A) surplus.
So far remittances have crossed the $26 billion mark and are expected to reach $29 billion by the close of the current fiscal year (June 30, 2021), the finance minister added.
About his future plan, he said that “we have to go to six to seven percent growth now, otherwise, the government would be unable to provide employment to two million youth every year.”
The minister said that now the government would take care of the poor people by moving to sustainable growth for a longer period.
The finance minister said that the IMF was plainly informed that the government can no longer burden the people by increasing electricity tariffs and imposing new taxes.
“This is the red line drawn by the prime minister; however, negotiations with the IMF are going on,” he added.
The finance minister also disclosed that the Fund was asking the government to impose an additional Rs150 billion “personal income tax” in the coming budget, while the government is already collecting Rs113 billion on this account.
However, the IMF was given an alternative plan to mobilise Rs5.8 trillion, he said, adding that the Federal Board Revenue’s (FBR’s) tax collection would comfortably cross Rs4.7 trillion in the current fiscal year.
Tax base broadening would be a priority in the next fiscal year without any harassment but third party audit would be conducted of 3. 4 percent people, and those found wilful defaulters would be put behind the bars, he added.
We want progressive taxation with tax on income and expenditure, while all other taxes would be done away gradually, said Tarin.
The finance minister said the power sector has been a major ‘black hole’ with intermittent increase in capacity payment and the present government wants to deal with the problem through a multi-pronged strategy.
He said that although some recoveries have improved and losses of power sector have been reduced during the tenure of the present government, annual increase in circular debt of Rs450 billion would increase to Rs1.5 trillion, if the capacity payment issue was not addressed.
Capacity payment would be expanded over a period of time to deal with the circular debt issue, and distribution companies (DISCOs) would be sold out after making them efficient; otherwise, these would continue to add billions every year to the circular debt. The finance minister also claimed that the government has been able to reduce the flow of circular debt from Rs450 billion to Rs250 billion.
The SMEs would be provided loans, diversification of export would be done to IT and auto parts, and dollars inflows have to be increased, he said, and added that the Chinese investors would be asked to relocate in SEZs.
He said 15 entities would be given to the Surmaya Pakistan for privatisation for their strategic sale.
The finance minister said the National Economic Council’s (NEC’s) meetings would be held on a quarterly basis, instead of yearly basis to better utilisation of public sector development programme allocation for the right projects as well as for better coordination with the provinces.
The minister said the performance in the Financial Action Task Force (FATF) was very good and the government was expecting some relief in the next review.
Although, he said that he cannot predict whether the country would be moved from grey to white list but the feedback of the committee was very satisfying.
This was the reason that Amazon has put the country on the seller list, he added.
The finance minister also said that the high food inflation was a major challenge for the government simply because the country has become a net importer of food items.
The government wanted to arrest the prices by increasing production and this budget would focus on agriculture to increase domestic production, and margin between farm to wholesale rate would be reduced besides creating strategic reserves of four to five major commodities, and administrative infrastructure would be put in place.
“We are importing wheat, sugar, ghee, pulses, and so on and this simply means that the country would be affected by the fluctuation of the prices in the international market,” he remarked.
He added that the sugar prices have increased 58 percent in the international market, palm oil’s 102-103 percent, and soybean oil’s and crude oil’s by 119 percent.
He said entire increase in the sugar price was not passed on to the consumes and 38 percent was absorbed by the government and similarly, palm oil’s 82 percent increase and soybean oil’s 96 percent increase were absorbed by the government.
The government increased crude oil price by only 32 percent as opposed to 119 percent increase in the international market.
About debt, he said that it increased on account of fiscal deficit and increase in discount rate also contributed to rise in total debt.
However, now in March end 2021, the total debt is stood at 38 trillion – 25 trillion local debt and Rs12.5 trillion foreign debt.
The increase in debt this year from last year was Rs1.76 trillion and the previous year it was Rs3.7 trillion growth.
He said that foreign current debt has reduced by Rs700 billion from previous year as it was Rs13.1 trillion in June 2020 and now it has come down to Rs12.5 trillion.
Copyright Business Recorder, 2021