KARACHI: Pakistan will have to pay $3 billion to the International Monetary Fund (IMF) before June and for this funds will have to be raised from the international market, Minister of State for Finance Rana Muhammad Afzal Khan said on Tuesday.

The figure given by the minister is at odds with what the State Bank says Pakistan owes on its external debt service obligations till end of fiscal year. According to the central bank, the total amount Pakistan will have to pay on its external debt is $2.5bn, and that this amount does not require recourse to any extraordinary measures to raise.

Addressing industry leaders and exporters at the Pakistan Hosiery Manufacturers Association (PHMA), the minister said the government plans to bring reforms in the tax system by bringing structural changes.

The government is going to reduce tax rate from current 30 per cent corporate tax to 20pc and will also raise exemption threshold from Rs0.4 million to Rs0.8m, he added.

By reducing corporate tax rate and enhancing tax exemption threshold the government will get a hit of Rs40 billion but the gap would be covered up by bringing in new taxpayers in the tax net, he explained.

The government, he said, has managed to annually register 20pc growth in revenue collection which took the total growth during last four years up to 80pc. Due to higher revenue collection achieved by the federal government, provincial allocations also doubled during this period, he added.

Mr Khan said that currently two major issues are being confronted by the country – falling exports and keeping suitable foreign reserves.

The minister emphatically said the government would not like to leave behind major issues for the next government and would try to keep foreign reserves at a comfortable level. However, he hoped the next government would also be of PML-N.

All out efforts are being made to support the export sector, he said. He hoped that soon payments against all the issued Release Payment Orders (RPOs) would be made. He also assured that Rs150bn outstanding sales tax refunds will also be paid soon to the exporters to ease their cash flow.

When his attention was drawn towards the outcome of Financial Action Task Force (FATF) meeting last week, the minister said that since there was no actionable material the result is based on political grounds. However, he said Pakistan will have work hard before the next FATF review meeting set in June.

Responding to a demand made by an industrialist, the minister said the government is going to announce an amnesty scheme soon. He hoped that the Duty on Local Taxes and Levies (DLTL) — which is coming to an end in the current fiscal year — may also continue beyond.

The minister also agreed with exporters that till such time the accumulated funds of Rs24bn, collected under the Export Development Fund (EDF), remained unutilised no further collection should be made from exporters.

Looking at the despondency of exporters, the minister there was a time that no foreign buyers were ready to visit Pakistan but now things have improved. Similarly, up to 2013 there was loadshedding for up to 16 hours per day but today there is no loadshedding of power and gas for industry.

The minister assured that as the energy mix improves after coming up of more hydropower projects, electricity charges will come down in due course and ultimately will be below US 7 cents per unit. This will improve industry’s competitiveness in the world market, he added.

Published in Dawn, February 28th, 2018