IMF delegation visit
A delegation of International Monetary Fund (IMF) led by its Regional Director Jihad Azour visited Pakistan and had meetings with the Prime Minster Imran Khan and Advisor on Finance Dr.Abdul Haffez Sheik. The Regional Director ruled any relaxation in revenue target of Rs.5.1 trillion and other tough conditions which have accelerated inflation, accentuated economic stagnation and dampened investors’ confidence. He argued that no immediate spurt in economic growth should be expected and jobs creation and boost in exports by Pakistan’s economy will take sometime. He expressed satisfaction over the economic policies of the present government.
The IMF Mission Chief for Pakistan Ernegto Rigo expressed satisfaction over significant increase in sale tax collection. However, he emphasised the Federal Board of Revenue (FBR) to strengthen tax administration and use the available data of rich people for broadening the tax base.
The increase in tax revenue has been achieved through collection of sale tax and other indirect taxes which impact the common man in terms of continued wave of high price spiral. The efforts of FBR to broaden the tax net through direct taxes have not succeeded. The documentation of economy drive has not taken off. The talks between the FBR and traders for either sales tax registration of fixed amount of income tax registration have failed. No date has been announced for another round of talks. Likewise, the CNIC based campaign of authentic tax profiling has fizzled out. Wealthy people, who have residential properties worth billions of rupees, big rental incomes and expensive vehicles, are still out of the tax net. Is it something wrong with tax administration or the political pressure from the ruling elite that stops FBR to bring them under the tax net?
The implementations of IMF programme conditions about increase in interest rate and hiking of electricity and gas tariffs have further vitiated the business environment. The high interest has made bank borrowing costly and squeezed the opportunities of credit availability for the private sector. The business community feels disappointment over keeping the policy rate at 13.25 percent as they were expecting reasonable cut in the interest rate by the Central Bank in the new monetary policy. However, it merits mention that in the last PMML-N government the extremely low interest rate of 6.5 percent did not give boost to fresh investment. It were the high tariffs of energy inputs and technological stagnation that impacted the economic growth, jobs creation and perpetuated decline in exports and alarming rise in exports of essential and non-essential consumers’ goods, creating a current account deficit of $35 billoion. Hopefully, the IMF advice of expanding tax base through direct taxes shall be taken seriously and conducive environment shall be created for domestic and foreign direct investment, slamming the doors of shock therapy of this donor agency after the successful completion of current loan programme of $6 billion.