- A $ 20 billion funding gap left the government with no choice but to turn to the IMF and accept its harsh terms, said Shaukat Tarin.
- The finance minister said he was doing everything he could to get the IMF relaxed under difficult conditions.
- Pakistani authorities and the IMF, for now, have agreed to continue discussions to narrow the differences.
ISLAMABAD: Federal Finance Minister Shaukat Tarin said it was not possible for Pakistan to exit the IMF program as it agreed to review the powers of the Federal Board of Revenue (FBR) to stop taxpayers in consultation with senators, The news reported Thursday.
The federal minister’s comments came during his discussion with the Standing Senate Committee on Finance in the House of Parliament on Tuesday. The meeting was held under the chairmanship of the committee, Senator Talha Mehmood.
Pakistani authorities and the IMF, for now, have agreed to continue talks to narrow the differences, but the IMF-sponsored program has been halted as the international moneylender said the sixth review under the Extended Funding Facility (EFF) will be completed in September this year instead of July 2021.
“Pakistan has expressed its wish to combine the sixth and seventh reviews jointly under the EFF in September 2021,” official sources said.
Tarin told the committee that the government would rewrite the powers of the RBF to arrest and prosecute taxpayers involved in the concealment of income.
The government had decided that tax notices would be sent by a third party, the finance minister told the committee.
He said the Pakistani economy was facing a difficult situation as the current account deficit (CAD) peaked at $ 20 billion and the government accepted the difficult terms of the IMF program.
The loan program provided by the IMF was launched under difficult conditions as the discount rate was raised to 13.25%, so that the debt service doubled, he said.
The minister said he did not agree with the IMF’s condition of increasing personal income tax to collect an additional 150 billion rupees in the next fiscal year, adding that he clearly had informed the fund team that it would not increase the burden on those already paying. their taxes.
He said he would raise taxes in his own way.
A $ 20 billion funding gap, he said, left the government no choice but to turn to the IMF and accept its tough terms, such as the rate hike. ‘discounting, the devaluation of the exchange rate and the increase in electricity and gas tariffs.
“We went to the IMF because the country did not have dollars to repay past loans,” he said, adding that $ 10 billion in short-term borrowing had been obtained by the previous government.
He said the strategy now is to move towards an inclusive, sustainable and long-term growth path to create more jobs.
The minister argued before the committee that he was unable to commit to whether or not GDP growth was sustainable, as it would be known after three to four years whether the country was heading towards a sustainable growth or if this was another boom-and-bust. cycle of rupture as experienced in the past.
However, he said he could guarantee that the measures taken by the government in the budget would lead to inclusive growth, because for the first time a bottom-up approach was taken.
Tarin identified the electricity sector as a major challenge for the economy and the government would face a problem of capacity payment as well as improving distribution companies to privatize them.
Meanwhile, PPP Senator Sherry Rehman, speaking on the occasion, said that as soon as the mini-budget started rolling in, oil prices were seen to rise.
The IMF’s program has been criticized for being ahead and making the lives of ordinary people more difficult, the senator said.
In response to Senator Rehman’s question, the Minister reminded him that “you and I had a discussion about the IMF program at a cabinet meeting in 2008 and I told you that if you had other options , then go get somebody else’s money (dollars). ”
He said the IMF’s program is not by consensus because “you borrow and they are the lender”.
The minister said the current government was getting loans to repay the previous ones, adding that the debt-to-GDP ratio had been reduced from 89% to 86% in one year of the government when the debt-to-GDP ratio of all other countries increased. due to the coronavirus.
The minister said he was making all possible efforts to obtain a loosening of the IMF under difficult conditions.
PML-N Senator Saadia Abbasi stressed that unemployment and rising inflation made life difficult for ordinary people, to which the minister replied that the only way to fight poverty was to increase income.
“Let us attack poverty with direct interventions,” he added.
The chairman of the Senate panel, Senator Mehmood, said it was absolutely necessary not to look at businessmen with suspicion and that it could be done by bringing about a paradigm shift.
To another question raised by Senator MQM-P Faisal Sabzwari, Tarin replied that there were still gaps in the latest 7th NFC Prize, as he now believed that the provinces’ share in the federal divisible pool should have been linked to their own income generation efforts.
He said the Center had also failed to increase the tax-to-GDP ratio from 10% to 15%.
Tarin said the agricultural income tax could generate Rs60 to Rs70 billion despite a contribution to GDP of around 20% per year.
The finance minister said two provinces had agreed to allow RBF to collect farm income tax on their behalf.
In response to another question from Senator Sabzwari, he pointed out that the agricultural sector, whose share in the GDP is 22%, was outside the tax net and that the provincial finance commissions were not formed.
“Farm income tax is a black hole and progressive thinking is needed to solve this problem,” he concluded.