During his first interaction with the media-persons on 28th December, 2017, Minister of State for Finance, Rana Afzal Khan spelt out challenges that the incumbent government faces during its remaining tenure. Managing external side of the economy will be a major challenge for the government in the remaining six months of the current fiscal year as dollar 6 billion foreign repayments are due before June 30, 2018. The minister, however, ruled out the possibility of taking another bailout package from the IMF; he referred to available options of commercial borrowings or issuance of bonds. The government is also exploring the possibility of purchasing oil on deferred payment from a friendly country. It is also unhappy with subsidies. The government is considering offering another amnesty scheme in an effort to provide an opportunity to Pakistanis for bringing their money back which will either be implemented through a Presidential Ordinance or a finance bill. The new government will try to manage the budget deficit at 5 percent of GDP for the current fiscal year. Tax reforms are also being discussed and tax notices to 10,000 persons, who have been identified by using available data of property transactions and travel visits, will be issued. There was a considerable increase in tax filers this year, with the number of filers increasing to 1.140 million so far as opposed to 0.9 million in the same period last year. Property tax was also discussed with the Prime Minister but since this levy falls within the domain of provincial governments, the Federal Government is not in a position to do much in this regard.
The observations of the State Minister for Finance indicate that the new team of the Finance Ministry is well aware of the issues of the economy but will not deviate much from the policy prescriptions devised by former Finance Minister, Ishaq Dar. The biggest challenge, of course, is the widening current account deficit and the rapid depletion of foreign exchange reserves. It is surprising, however, that the present team is not prepared to face the challenge squarely and take some bold initiatives to remove the structural problems of the balance of payments in order to eliminate or narrow down the current account deficit but would continue to find ways to finance the gap through ways which were also favoured by the earlier team. Commercial borrowings and issuance of bonds are not only expensive but add to the debt burden of the country. Some political cost has to be incurred to import oil on deferred payment basis. Besides, deferred payment does not mean free oil but a certain payment which has to be paid in future in any case. So far as amnesty scheme is concerned, it would hardly prove successful unless conditions on the ground are changed drastically in terms of security, ease of doing business etc. Budget deficit of 5 percent of GDP is also difficult to achieve. Issuance of income tax notices to 10,000 potential taxpayers from 1st January, 2018 would also not make much difference. Anyhow, even if 1.140 million tax returns have been received during the current year, these constitute only a tiny proportion of the overall population of the country. The only observation of Rana Afzal Khan which looks to be new and needs to be implemented is with regards to property tax. Compared to many other countries, this tax is not only low but is not properly collected in many of the city areas in Pakistan. Finally, the new team seems to be concentrating all its energies to ensure that no unpopular decisions are taken during the next 6 months. This short term approach could create more difficulties for the next government which would be obliged to take more harsh measures in the next five years. Proper management of the economy should not be postponed or sacrificed at the altar of political expediency.
Comments
Comments are closed.