ISLAMABAD: Pakistan Tehreek-e-Insaf (PTI) Friday released a “report card on 90 days performance” of the Pakistan Democratic Movement’s government, blaming it for accepting tough International Monetary Fund (IMF) conditions, record inflation, energy crisis, stalled economic activities besides big tax breaks to favourites.
Quoting news reports in its ‘report card’, the PTI claimed that the IMF has set four tough conditions, some of which were there previously and some of which are new.
“We believe that this is likely due to the lack of trust that has been developed recently, especially due to relaxation in the NAB laws and poor budget 2023,” it added.
The report noted that increasing electricity tariffs was previously a structural benchmark.
Gradually imposing Rs50/liter PDL to collect Rs855 billion was previously a prior action; however, the quantum has been increased from Rs30 to Rs50.
Ending the government’s role in determining oil prices is a new condition where the IMF asked to end the government’s role in setting fuel after bitter experience of giving subsidies of Rs300 billion. Prices will be deregulated and automatically adjusted to recover the actual cost of buying, taxes will be over and above global prices, means price may change daily, the report noted.
Setting up an anti-corruption task force to review all laws aimed at curbing graft in government departments is a new condition which has been imposed after the recent amendments to the accountability law that unsettled the IMF.
In case the government fails to comply with these prior actions, and the country fails to resume the IMF programme, the country will likely head to default as other lenders will be reluctant to roll over their existing loans or provide fresh financings amid the lack of the IMF support, it added.
The Report claimed that the PTI government’s economic performance in the last two years was the best in 17 years as documented in the economic survey which was signed off by the PDM government in May 2022.
“We advised the people who matter that although, the economy was doing well but political instability in the present international economic environment, can destabilize the economy”, stated the PTI in its report.
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The PDM parties’ platform of price hike proved to be a ruse. Their performance in 90 days has proved it. They actually came into power to restructure the NAB and the Election laws to their advantage, said the report, adding that another reason was to revert to regressive taxation to protect their institutional/business interests.
The report noted that the PDM government broke all records of inflation. 21.2 per cent CPI Inflation was recorded in June, the highest in 14 years. When the PTI left in March, CPI was 12.7 per cent. Further 6 per cent month-on-month CPI in June was the highest ever recorded in a single month.
The report warned of more inflation ahead. Wholesale Inflation recorded at 40 per cent, the highest since 1974. Retailers input prices rising sharply will lead to higher consumer prices while transport and energy costs, the main contributor to cost-push inflation.
Further, import ban and PKR devaluation are also fueling prices. Inflation, adding to the misery of vulnerable households, it added.
The report blamed that the government in the Centre and provinces are abandoning welfare projects. Bottom-up programs to benefit low-income groups stalled or abandoned while Ehsaas Langar and Panagahs closed down.
There was no unscheduled forced load shedding during the PTIs government, however in May 2022 on average total loadshedding was 6,000 MW and in June 2022 total loadshedding stood at 7,500 to 8,000 MW, which translates into loadshedding of 4 to 8 hrs in urban areas and 8 to 12 plus hrs in rural areas.
The report noted that power plants using coal are running at 25 per cent capacity because coal is not being purchased by the power plants due to insufficient payments for energy by the government.
Further, the RLNG plants are not operating at full capacity because RLNG is not being purchased in the spot market by the government. RFO plants are not being operated at capacity because RFO is not being purchased by the IPPs due to insufficient payments by the Government to the IPPs for fuel already consumed for energy generation.
Load shedding to remain as the imported government has chosen to inflict load shedding on the people to save FX by not releasing payments to the IPPs and Power Plants on time.
The report noted that petrol and diesel price will affect public transport, agriculture tubewells, tractors, prices of food and essentials as prices of all daily items have gone up 30%-50%.
Further, the borrowing cost of consumer loans has increased steeply and will rise more.
The report noted that devaluation and higher KIBOR rates increased the cost of doing business.
Textiles, automobiles, mobile phone manufacturing have shut down. Millions unemployed as a result of the unavailability of power and gas and rising utility bills have started to impact exports, industry, and agriculture.
Higher tax rates on 13 businesses will result in lower reinvestment and higher prices for consumers.
Growth of Industry badly impacted. Economic Activity is taking a hit due to record inflation and power cuts as LSM fell 13% m/m in April 2022 from March, Cement dispatches fell 8% q/q during Apr-June, from Jan-Mar, Petrol sales down 12% (June), Diesel sales down 16% (June), auto sector has stopped booking of new cars Motorcycle sales dropped 2% m/m in May 2022 and 400 textile mills facing shutdown, loss of export orders.
The report noted that rupee weakness is due to a lack of confidence of domestic and external investors; leading to dollarization and flight of capital. At REER=100, rupee value should be 185.
The report noted that bank charging higher to government due to a lack of confidence on the PDM government’s economic policy.
The report noted that highest tax collection of Rs6.1 trillion in the fiscal year 2022 as a direct consequence to the reforms by the PTI government and despite 0 per cent GST on petroleum products.
In fiscal year 2021, 35 per cent of all GST collected was from petroleum products. Further PTI government imposed no super tax, no increase in tax rates.
The report noted that Imran Khan slashed Petroleum Levy to 0. The PDM govt imposed PL of Rs10/litre on petrol and diesel.
Tax burden on existing taxpayers increased in Budget (super tax, income tax, WHT on economic activity etc).
Further relief was given to tax evaders through a fixed tax regime for traders which would result in substantial revenue loss.
The GST exemptions have been reintroduced.
Withdrawal of the CNIC condition has hit the economy’s documentation drive and will encourage “black economy”. Tax reforms are being rolled back, the report stated.
Broadening of Tax Base Programme has been abandoned. The PTI left a database of 43 million potential taxpayers. They believe in tax on existing taxpayers. Track and Trace System implementation has visibly gone into a slowdown. We would pursue its implementation with full throttle into tobacco, sugar, cement and fertilizers sectors and then move into petroleum, beverages, steel, and pharmaceutical sectors.
POS implementation is again facing resistance and relapse. POS integration is the PTI’s key enforcement plank and will implement it on all integratable retailers. Digitalization and integration of supply chain operators would be undertaken with full thrust. Misinvoicing, which not adds to revenue loss but also causes hemorrhage of foreign exchange, would be a major target for FBR to handle.
Pakistan Single Window and the new Pakistan Inland Revenue Code would be rolled out as facilitation measures targeting ease of doing business.
Copyright Business Recorder, 2022
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