- Adviser to PM on Finance says govt would ensure legislation for SBP autonomy
Adviser to the Prime Minister on Finance Shaukat Tarin said on Monday that the government has decided to increase the Petroleum Development Levy (PDL) by Rs4 every month to eventually take it to Rs30 as part of the negotiations with the International Monetary Fund (IMF).
The announcement was made by Adviser to Prime Minister on Finance and Revenue Shaukat Tarin, who was accompanied by Minister for Power Hammad Azhar in a press conference earlier today. Tarin stated that despite the Covid-induced slowdown, the IMF lauded the economic growth of Pakistan.
“Pakistan has successfully negotiated staff-level agreement with IMF, and will now receive $1 billion,” said Tarin.
“The government is moving forward with its agenda to introduce reforms,” he added. He informed reporters that the IMF told us to carry on with the taxation reforms, adding there is a lot to be done to improve Pakistan’s power sector. “On external account, the IMF has said that the economy is growing, but there is pressure on the external account.”
“They have also agreed to take actions to curb the inflation rate, and tone down the overheating in the economy,” he said.
The completion of the review would make available SDR 750 million (about $1,059 million), “bringing total disbursements under the EFF to about $3,027 million and helping unlock significant funding from bilateral and multilateral partners,” the IMF said in a statement.
Tarin said that the resumption of the programme was taking place after tough negotiations with the IMF. “The IMF had demanded to impose Rs 700 billion worth of taxes, however, the government succeeded in approving tax exemptions on income tax and agricultural sector.
Meanwhile, the ex-banker said reforms are being introduced to provide clarity in the role of the State Bank of Pakistan (SBP). “Under which, the primary objective of the central bank would be to provide price stability, whereas the State Bank would be independent in its monetary and exchange rate policy,” he said.
“The IMF has also said that the implementation of these reforms could affect the lower-income groups, for which the government should provide targeted subsidies,” said Tarin.
Talking about the IMF's prior actions, the ex-banker said that GST exemption would be introduced in the form of a Supplementary Finance Bill. “PDL would be increased by Rs4.95 on a monthly basis, and to take it to Rs30.”
Tarin said that the government will ensure that legislation regarding the State Bank of Pakistan's autonomy is passed through the parliament, as agreed with the IMF.
He said that the government believes that the SBP, similar to other central banks, should be independent in implementing the monetary policy, exchange rate policy, and price determination. “We believe in it. God willing, we will get it passed," he said.
Tarin said that the government would appoint the central bank governor and the board of governors.
The advisor said that he believes in broadening the tax base and not in tax pyramiding. “In my view, increasing tariffs is not the solution as the problem we are facing is of capacity payments, and the increase in tariff would make the industry uncompetitive and increase inflation,” said Tarin.
Meanwhile, talking about the agreement with IMF pertaining to the energy sector, Minister for Energy Hammad Azhar said that they have already carried out the IMF's prior action plan of increasing the base tariff last month.
“We may increase base tariff in the coming months,” said Azhar. However, the agreement with the IMF would not impact our winter seasonal energy package and industrial energy tariff, he said.
“The IMF appreciated the progress made in the energy sector, and the decrease in circular debt, despite the fact that the capacity payments are increasing, which has reached Rs800 billion,” said Azhar.
He said that the world is going through a commodity cycle, amid disruptions created due to the Covid pandemic, which has pushed prices of essential items to record highs. “However, I believe that the resumption of the IMF program would bring more stability to the economy of Pakistan,” said Azhar.