ISLAMABAD: The prime minister’s think tank at a meeting on Sunday advised the government to consider reducing tax rates and shifting focus of federal and provincial development programmes to high-impact areas while keeping a close eye on an effective rescue and relief campaign to protect vulnerable segments of society from the serious fallout triggered by Covid-19 in the country.
The focus of the meeting appeared to be more on relief operations as some participants also insisted that policymakers should not lose sight of the medium- and long-term direction of the economy and some steps should also be in place for restructuring and redefining government role and rightsizing the path. The meeting also discussed easing of regulatory requirements for the financial sector.
The participants expressed concern over the serious data problems in the SME sector and its possible negative impacts on the poverty situation. “The focus at present is on rescue and relief. Recovery is not in sight in the near future,” a participant of the meeting told Dawn. He said that a few nodes had been identified that could trigger some recovery in the next stage while properly looking after the rescue and relief phase in an effective manner.
Meeting decides to discuss fiscal proposals with FBR
Adviser to the PM on Finance and Revenue Dr Abdul Hafeez Shaikh presided over the meeting of the think tank called to assess the emerging situation resulting from Covid-19-related economic slowdown and its biting impact on the masses and businesses.
The think tank has devised an “Impact and Urgency Response Matrix” and identified six priority areas for focused deliberations and implementation.
It identified multiple actionable themes with low, medium and high economic impacts, pitched against short-, medium- and long-term horizons. The participants discussed evolving economic scenario and identified priority areas which carry the potential of giving maximum boost to the economy through accelerating aggregate demand and easing out supply concerns while also ensuring stability of the financial system which is equally critical for robust recovery of the economy.
Dr Shaikh emphasised the need for evolving a roadmap for chosen domains, thereby bringing clarity about what was needed to be done and who would do it. The need for real-time data and research was highlighted in the development of a clear roadmap and implementation framework.
The selected six broad priority domains included boosting social safety nets (Ehsaas and allied initiatives), food security and safety of supply chains, boosting the role of banks and financial institutions in appropriately designing incentives for market participants, kick-starting low- and medium-cost housing projects, making PSDP and Provincial ADPs responsive to labour-intensive propositions and business facilitation through fiscal interventions.
The forum decided that fiscal proposals including changes in rates of sales tax, refunds etc. would be discussed with FBR in detail so that the next federal budget addressed these burning issues which were essential for spurring consumer spending.
Moreover, proposals related to financial and banking matters including review of payroll refinancing scheme, incentives to banks to finance microfinance institutions and banks (MFIs and MFB), measures for enhancement of remittances and injecting additional liquidity to commercial banks by cutting cash reserve ratio and statutory liquidity ratio (CRR/SLR) and capital conservation buffers (CCB) were also discussed.
Published in Dawn, May 4th, 2020