03 October 2004	Sunday	17 Shaban 1425

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ISLAMABAD, Oct 2: Pakistan will sign an agreement with the World Bank in Washington next week for getting a $102.9 million concessional IDA credit for the implementation of Tax Administration Reform Programme (TARP) in the country.

Officials told Dawn on Saturday that the TARP agreement with the World Bank would be negotiated and signed by Secretary, Economic Affairs Division, Dr Waqar Masood, on behalf of the government of Pakistan.

Dr Masood will be assisted in the meeting with the bank officials by Central Board of Revenue Chairman M. Abdullah Yousuf and tax policy reform member M.S. Lal, who will leave for Washington on Sunday.

The project included financing of $102.9 million credit to be repaid within a period of 35 years with a service charge of 0.75 per cent. And an amount of $23 million will be contributed by the UK funding firm DFIDs, which is a grant and will not be refundable.

The TARP is aimed at achieving financial and administrative autonomy (legal changes), restructuring the Central Board of Revenue along functional lines and developing a well trained and motivated workforce in order to develop and manage a modern and efficient revenue administration.

CBR spokesman M.S. Lal told Dawn on Saturday that with the investment in the tax reform project, the government would be able to improve tax-to-GDP ratio by 0.2 per cent every year, which meant an increase in revenue by the end of the reform period to the tune of Rs1,000 billion in the year 2008-09.

Mr Lal said in this connection the CBR had already constituted a five-member task force to work out a comprehensive strategy document by mid-December 2004 for achieving a 0.2 per cent growth per annum in the tax-to-GDP ratio.

The task force will identify sectors and products which are either over-taxed or under-taxed to increase their share in revenue collection.

Mr Lal said the CBR would have to raise its revenue from the private sector in July-August 2004, Rs19.7 billion were lent by commercial banks. In the comparable period of last year, their share was Rs3.5 billion in total private sector lending of Rs7 billion. Senior bankers say commercial banks' lending increased due to higher demand for credit in agricultural and textile sectors.

GOVT. BORROWING: SBP data shows that in July-August 2004, government borrowing for budgetary support zoomed to Rs52 billion, bursting through the full fiscal year target of Rs45 billion. In a year-ago period the government had borrowed Rs33 billion from the banking system. Bankers say rising trend in the interest rates was a key factor also behind higher government borrowing.

The weighted average yield on benchmark six-month treasury bills rate rose from 2 per cent at the end of last fiscal year to 2.52 per cent in July and then to 2.62 per cent in August 2004.

Senior bankers say the government had to borrow more from the banking sector as it deferred collecting petroleum development levy on domestic oil prices to keep them from reflecting the increase in international prices. But they say that as the fiscal year progresses, the government may find room to reduce its bank borrowing. An anticipated higher borrowing through non-bank sources and a big increase seen in the profits of state-run entities like OGDCL and PTCL, much higher than the budgeted estimates, should enable the government to cut its borrowing form banks.