ISLAMABAD: Finance Minister Shaukat Tarin has said that stabilisation is no more affordable for Pakistan’s economy that should now shift gear towards higher growth and the International Monetary Fund (IMF) would be convinced to relax conditions particularly those related to power tariff hike.
Testifying before the National Assembly’s Standing Committee on Finance, Mr Tarin said the higher power tariff was leading to corruption and affecting economic growth. The conditions agreed to under the IMF programme were very harsh, he said.
He claimed that the government would take alternative measures to reduce circular debt instead of tariff increases. Similarly, he said, tax net would be expanded instead of increase in taxes to achieve revenue targets. However, he admitted that the state-owned entities that the government was unable to run in the public sector would be privatised.
The finance minister said the IMF was being convinced to have a sympathetic view towards Pakistan after it had been hit by the third wave of coronavirus pandemic. Unless the country moved to higher economic growth, nothing would improve and if we continue with stabilisation that has been in place for over two years, neither revenue collection would go up, nor job opportunities would be available to people or productive capacity of the economy could improve, he explained.
Shaukat Tarin tells NA panel it was a mistake to keep policy rate at 13.25pc
He informed the committee that the country had been in the stabilisation mode since 2019, but it was no more sustainable and if the government continued with the same policy, there would be no economic growth for next two years. In the upcoming budget, he said, the public-sector development programme would be increased so that all the provinces would get equal growth opportunities.
He said a lot of complications were emerging in the absence of economic growth and one of them was the continued increase in capacity payments in the power sector. Even 4pc to 5pc growth next year would not be insufficient, he said.
He told the committee that comprehensive strategy had been formulated to shift the gear and move to higher economic growth. He also criticised the high policy rates of the State Bank of Pakistan (SBP). It was a mistake to keep policy rate at 13.25pc in the past, he said.
The minister, who appeared before the standing committee for the first time after assuming charge last month, said the IMF had to be explained that the world was keeping lose the fiscal and monetary purses in view of the health pandemic but Pakistan was still facing those tough conditions. He expressed the hope that the IMF staff would understand Pakistan’s position as the government requested for a sympathetic view due to the pandemic.
He explained that the IMF target could be met through alternative measures, as higher electricity rates were only promoting corruption.
The finance minister said he did not believe in increase in taxes to increase revenue collection but those outside the tax net would be tapped. Also, he said, chances for any harassment by FBR officials would be eliminated for which audit procedures would be changed.
As the country lacked proper planning, he said, he selected 10 to 12 sectors on which economic experts had already started working so that they could come up with long-term planning for areas such as price stability, agriculture, industry, revenue, housing, social protection, national services, debt management and privatisation of loss-making state-run entities.
Minister Tarin told the committee that 85pc of provincial revenues was being spent on nine major cities, while the health and education sectors across the country were under-funded and ignored. At the same time, the housing sector required to be given more attention and it had only 0.25pc share in Pakistan’s GDP compared to its 80pc share in US economy.
He said Pakistan’s exports did not grow because most businessmen were running the domestic industry while foreign investment was very limited.
Mr Tarin told the standing committee that China would be requested to provide jobs to 10 million Pakistani in its industry as it had employed workers from across the country.
Revised budget strategy paper
Pakistan Muslim League-Nawaz (PML-N) leader Dr Aisha Ghaus-Pasha welcomed the finance minister’s briefing and said it was a positive change that might generate ‘hope’ in the system. She said what the minister had said was challenging but the country had to move out of tough conditions and reconsider the budget strategy paper.
The minister agreed to come back with a revised budget strategy paper and would like to have a consensus. He also agreed sales tax system would have to be improved. He said the 17pc General Sales Tax rate was very high and a mechanism had been prepared for its reduction.
He said the government was also working on a sales tax system for small businesses and a positive improvement would be shared with the panel soon.
Published in Dawn, May 4th, 2021