Inflation, not poverty, is real issue: Shaukat Tarin

Published November 27, 2021
ADVISER to the Prime Minister on Finance and Revenue Shaukat Tarin speaking to members during his visit to Pakistan Stock Exchange on Friday.—Online
ADVISER to the Prime Minister on Finance and Revenue Shaukat Tarin speaking to members during his visit to Pakistan Stock Exchange on Friday.—Online

KARACHI: Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin downplayed on Friday the incidence of poverty in Pakistan while insisting that its rate has gone down recently.

Speaking to journalists at the Pakistan Stock Exchange (PSX), Mr Tarin said the latest figures by the World Bank show the incidence of poverty dropped to 4.2 per cent from 5.4pc a year ago. “Our problem is inflation, which has affected the lower middle class in urban areas the worst,” he said.

The adviser said the rural areas were thriving as bumper crops brought prosperity there and led to ‘record sales of motorcycles’. He also believed the middle and upper classes were doing well.

“Restaurants are full of people. Cars are getting expensive,” he remarked.

Repeating his statement from two weeks ago, Mr Tarin again warned speculators in the foreign exchange market not to play with fire. “I warn speculators: the rupee will swing the other way too. We’re taking some actions that will change the direction [of the exchange rate movement].” He also reiterated his claim that the rupee was undervalued by roughly Rs10.

Rubbishes claim of mini-budget, asserts only some tax exemptions to be withdrawn

Although the exchange rate hovered above Rs178 in the open market on Friday, the finance adviser insisted that its actual value should be Rs165 to Rs167 as per the real effective exchange rate, a technical measure that compares the value of a nation’s currency against the weighted average of the currencies of its major trading partners.

Tax exemptions to be withdrawn

He took exception to a reporter’s question about the impending ‘mini-budget’ to formalise the policy measures being taken under the soon-to-be-resumed loan programme by the International Monetary Fund (IMF). “Don’t sensationalise. There’s no mini-budget. Some [tax] exemptions will be withdrawn.”

Mr Tarin said he stood his ground and refused to impose new taxes though the country’s economic team — under the preceding finance adviser — had signed up for “exemptions and new taxes” worth Rs700 billion in its negotiations held in March this year.

He said he agreed in principle with the IMF’s argument against tax exemptions. “What’s the point in distorting the system by charging different rates of sales tax?” he said, noting that incentives should rather be in the shape of targeted subsidies.

Non-productive investment

The finance adviser vowed to introduce a “certain scheme of taxes” mainly for the real estate sector so that non-productive investment “can be recycled to the other sectors of the economy”.

In his speech to mark the maiden listing on the Growth Enterprise Market (GEM) board, which is a separate counter of the PSX reserved for high-risk small and medium enterprises (SMEs), Mr Tarin said benefits to the real estate sector must be aligned with those extended to other productive sectors of the economy. “We do see an anomaly in the real estate sector when plots of land are bought and are held for years. That’s productive capital sunk,” he said.

He called for developing capital markets to ensure easy access of SMEs to funds in both debt and equity forms.

“SMEs are too reliant on the banking sector for funding needs. But even the footprint of banks on GDP is just 33pc. Lending [as a percentage of deposits] is just 42pc. This means only 15pc of GDP is supported by banks,” he said.

Later on, the finance adviser visited the office of the Pakistan Banks’ Association (PBA), according to a press release. It said the PBA conveyed its concerns to Mr Tarin about the continuing ‘wide disparity’ between the lower tax rates on profit/dividends from investment in shares listed on the stock market as well as units of mutual funds and the tax rates on profit from bank deposits classified as ‘profit on debt’.

Regarding PBA’s concerns related to disparity in the tax rate on banks and tax rate on the corporate sector besides the continuation of the super tax on banks, Mr Tarin “understood and agreed with the PBA” and promised to look into the matter, the statement added.

According to a separate press release by the Central Depository Company (CDC), Mr Tarin inaugurated the country’s first Professional Clearing Member (PCM) at the CDC House. The introduction of the PCM regime is aimed at minimising the risk of custody defaults by transferring custody of shares to the PCM, it added.

Published in Dawn, November 27th, 2021

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