If delay on RGST persists: some other options can be exercised

Finance Minister Dr Abdul Hafeez Shaikh on Saturday hinted that the government could exercise other options for widening tax base, if the consultation process on Reformed General Sales Tax (RGST) got delayed. Talking to journalists after launching of 'Leveraged Market Products' at Karachi Stock Exchange (KSE), the finance minister said the government can't spare more time developing consensus on this issue.
He said the RGST proposal approved by the Senate Standing Committee is now awaiting the National Assembly Standing Committee's nod and then would be moved before the parliament. The minister said the allies have to be taken on board in making policy decisions. "We must not allow politics to defeat economics," he added.
"The government wants to maintain a balance in a coalition government," he said, adding that the "government will not allow politics to degenerate the economy." He said the government was trying to limit the fiscal deficit at five percent of GDP this year. The fiscal deficit was controlled in last six months due to drastic cut in government expenditures, he said. The government has slashed the size of the federal cabinet by two-thirds to 22 members only, he said, adding that the government has also placed a freeze on it non-developmental expenditures.
He said the generalised subsidies must go. "The government wants only targeted subsidies for the deserving segments of the society," he said. The minister said the government was facing challenges of the impacts of devastating floods of last years and recent increase in oil prices in the international market. Despite these challenges, he said, the economy was showing encouraging signs. "The country's exports are expected to cross $22 billion mark for the first time in its history while remittances will cross $11 billion this year," he said.
Earlier, the Dr Abdul Hafeez Shaikh formally launched three leveraged products namely MTS, MFS and SLB at the Karachi Stock Exchange. Speaking at the launching ceremony, the federal finance minister said that the launch of these products was a milestone for the country's equity markets.
He was optimistic that the trading activity would increase at the stock exchanges after launching of these products and availability of financing to investors. He pointed out that the government was considering stock issues of public sector companies and said new listings would also help generate more trading activities at the share markets.
He assured that the government will encourage new listings at the stock markets. The minister noted the needs to develop debt market in the country and said that the stock exchanges should work in this regard. SECP Chairman Mohammad Ali Ghulam Muhammad speaking on the occasion said that new leveraged products have been developed in consultation with all stakeholders including a consultation group and a committee of independent professionals. All three stock exchanges, National Clearing Company of Pakistan Limited (NCCPL), banks, mutual funds and all other stakeholders were also consulted, he added.
After a long process, these products have been developed as more transparent, efficient and with better risk management measures, he said. "Now these products are with the stock exchanges," he said, adding that "stock exchanges can review them, refine them and they can suggest any change in these products," he added.
He requested the government for the early passage of Demutualization Act from the parliament. The chairman of KSE board, Muneer Kamal talked about the high interest rates and urged the minister to look into the possibility of reducing mark-up rates to lower financial cost in the country.
Acting Managing Director KSE Haroon Askari, in his address of welcome highlighted the KSE performance. He said that lack of leverage products were the major cause for low volumes in the market for the past year. He was optimistic that the retail investors' participation would increase the trading volumes at the stock exchange after launching of these products.