News Desk |
“Current fiscal deficit reflects the incompetence of PML-N and PPP tenures, but Asad’s taxation policy is a blunder as well”, Muhammad Zubair Khan, a senior economist said to Doctor Moeed Pirzada, on his prime-time show “Live with Moeed Pirzada” on Wednesday, 19th December.
Finance Minister Asad Umar has said that the Pakistan Tehreek-e-Insaf (PTI) government is likely to introduce another ‘mini-budget’ to address the economic challenges facing the country. In his briefing to the Senate’s Standing Committee on Finance, Umar said the government was mulling over bringing another supplementary budget in January 2019, but no final decision has been made as yet.
IMF loan, if used for the purpose of the country’s reserve rather be directed for investment and services creation, soon after the deal completion indicates a steep financial decline.
“An increase in taxes had been proposed but the government could consider decreasing taxes in order to boost the economy,” he said. The finance minister further said, “The government has decided to supply gas to exporters at $6.5 per MMBTU and electricity at 7.5 cents per unit,” adding that a notification would soon be issued in this regard.
“The government has also decided to issue bonds for tax refunds,” he added. If a supplementary budget is announced next month, it would be the second such budget introduced by the Pakistan Tehreek-e-Insaf (PTI) government since it was voted into power in the July 28th general election.
The finance minister had presented Finance Supplementary (Amendment) Bill 2018 in the National Assembly in September, saying that “difficult times called for difficult measures”. Last month, Finance Minister Asad Umar had claimed that the country’s imminent balance of payments crisis had been averted after Chinese commitment for assistance.
“Immediate balance of payments crisis is over after Chinese commitment and $6 billion bailout package from Saudi Arabia,” Mr. Umar said while speaking alongside Foreign Minister Shah Mehmood Qureshi at the Foreign Office when Prime Minister Imran Khan’s concluded maiden trip to China.
PM Imran Khan had approached China, Malaysia, UAE, and Saudi Arabia for financial assistance to overcome the alarming economic crisis in Pakistan and to skip the tough conditionalities of IMF. “Has PTI’s strategy failed so as to compel the government for another supplementary budget? Dr. Moeed Pirzada raised the inquisition. “Though not enough, but the support from China, UAE, and Saudi Arabia has normalized things a bit”, Aqeel Karim, Chairman AKD Group said.
To reduce the fiscal deficit, Pakistan has to reduce expenditure or increase taxes. However, unfortunately, the tax net has a very low percentage of citizens.
The country’s fiscal and trade deficit created havoc. The government’s decision of increasing interest rate from 6.25 to 10% has affected the economic growth to 4% which was 5.8% in PML-N setup. Similarly, it has had negative impacts on the devaluation of currency and high inflation rate. But, “the increase in taxation and interest rate is a tough decision to reduce spending, thereby putting the economic policy in the right direction, for the first time in a very long time”, Aqeel Karim said.
IMF loan, if used for the purpose of the country’s reserve rather be directed for investment and services creation, soon after the deal completion indicates a steep financial decline. For instance, in the previous regime, Pakistan’s reserves were $14 billion which decreased to $9 billion when these policies were taken up.
“The crisis of financing gap is not an issue. The basic problem lies in the fact that Pakistan’s capacity of earning forex is less than its consumption. To reduce the fiscal deficit, Pakistan has to reduce expenditure or increase taxes. However, unfortunately, the tax net has a very low percentage of citizens. And the increase in taxes will further humiliate the production and contribution of the taxpaying community”, Muhammad Zubair said.