The World Bank (WB) has released a report on Sunday, highlighting the Covid-19 impact on the South Asian economies. The fall outs on Pakistan’s economy are extremely worrying. The already worse macroeconomic indicators will further deteriorate. Gross domestic product is likely to register a negative growth rate of either 2.2 percent or 1.3 percent in better economic scenario. The report mentions accelerated outflows of portfolio investment; steep fall in home remittances; whooping fiscal deficit in the range of 8.7 to 9.5 percent; and renegotiation for deferring the payment of high interest bearing short term commercial loans, which have been acquired from China, Saudi Arabia and UAE. The predictions in the report are in sharp contrast to the last week estimation of WB, showing a positive growth rate of 1 percent in the national income and output of the country.
In a quick response to the WB assessment report, Prime Minister Imran Khan has once appealed to the leaders of rich countries, the UN Secretary General and multilateral lending institutions for giving debt relief to developing countries like Pakistan in shape debts waiver and debt rescheduling. The facility will enable these countries to divert more resources for towards healthcare in the prevailing Covid-19 pandemic and mitigating its impact on their economies.
Government is cognizant of plummeted GDP growth in the current fiscal year and has offered an attractive package of fiscal incentive to the construction sector, which include tax amnesty for regularizing black money and channelizing it into productive investment and charging a fixed tax at fixed rate on income and capital gains. The draft of tax laws amendment ordinance 2020 has been prepared to give tax concession to investors, builders and developers of construction sector. The sector not only provides numerous job opportunities but also gives support to a number of industries. The proposed law will amend the Finance Act 1989 and section 111 of Income Tax Ordinance 2001. The provisions of draft ordinance give immunity to investors, builders and developers from showing source of income. However, they will have to get their firms registered with Security and Exchange Commission of Pakistan. Under the draft ordinance construction activities have been divided in three categories for charging tax at fixed rate. Three metropolitan cities have placed in category -1 where a fixed tax at Rs.250 per square foot shall be charged. In big cities of category- 2 tax rate will be comparatively lower and in small towns, placed under category-3, a levy of Rs.50 per square foot shall be charged.
If economic activity revives in the construction sector and subsequently gains momentum, then production will get spurt in the industries such as cement, steel, chipboard, electrical appliances and bricks kilns. It will lead to significant increase in the national output and employment and the probability of negative economic growth rate can be averted.
