ISLAMABAD: Prime Minister's Advisor on Finance and Revenue, Dr. Abdul Hafeez Sheikh hinted on Saturday that budget 2020-21 can be adjusted in accordance with the ground realities.
In response to a question from Business Recorder during his post-budget press conference as to whether the federal budget 2020-21 would be for a quarter or the entire year, the adviser responded that "all budgets are annual but at the same time if Covid-19 intensifies or something big happens, the budget can be adjusted."
"We look at things with an open mind, this is not the nineteenth century when things were written on paper; this is managed round the clock," he said, adding that "adjustments imply accuracy by those people who think about the future."
The provinces can prepare their budgets independently as per their projections of revenue expected to be collected by the Federal Board of Revenue (FBR), he suggested to provincial governments. Minister for Industries and Production, HAmmad Azhar, Minister for Information, Syed Shibli Faraz, Prime Minister Advisor on Commerce and Investment, Abdul Razak Dawood, Secretary Finance and Chairperson Federal Board of Revenue (FBR) were also present during the press briefing.
Sheikh said it is failure of every government that Pakistan's saving rate is as low as tax collection. Pakistan collects only 10 or 11 per cent of its income. He claimed that the incumbent government tried to increase its base for the future but couldn't due to the corona outbreak.
In reply to another question as to how Rs 1000 billion additional revenue will be collected next year he said, this has to be increased in a smart way and with the philosophy not to increase the burden on existing tax payers; the government wants to expand tax net but not impose any new tax.
"Nothing can be said with certainty as nobody knows how long the current situation will continue and with what intensity and when things will come t o normal. If economy is restored Rs 1000 billion is not a big thing as Pakistan is a big country and demand will increase in those countries which import goods from Pakistan. No one can say anything with certainty but we are keeping an aspiration that effort should be made for Rs 1000 billion," he continued.
Dr Shaikh said that some people say that if the federal government fixes a target of additional revenue of Rs 1000 billion, provinces will prepare their budgets on these estimates and if the amount does not materialize "then it will be Hafeez Shaikh's fault but provinces have the authority to prepare their own budgets in whatever way they think is better."
"If provinces think that the revenue will be Rs 4.6 trillion instead of the targeted Rs 4.9 trillion, then they should formulate their budgets as per their own assessments," he added.
Dr Hafeez Shaikh further stated that if provinces feel that there is always a gap between FBR's revenue collection target and reality then they should incorporate it in their budgets. "It's up to them, we are estimating Rs 4.9 trillion target if the intensity of Corona is reduced but in case it continues like now and intensifies then it will be less," he added.
He further contended that the budget for next fiscal year is focused on coping with the impacts of Covid-19 and provide relief to the masses.
He said privatisation of RLNG plants was at an advanced stage before the pandemic broke out, which has delayed it. He said, 15 new companies have been added to list of entities which are on active list of privatisation programme which will be pursued.
He said, the IMF has not been established to be cruel to Pakistani people. It's an organisation which has been established by the whole world. The purpose of this organization is to give money to those countries which face economic difficulties with the approval of its Board. It's like a bank and every bank wants that its client should be in a position to return the money back.
In its relationship with the IMF, Pakistan's role is not that of a subordinate and it is not necessarily required to follow each and every instruction of the Fund, Dr Sheikh said, adding that the basic stance of IMF is that the country should spend in accordance with its worth and if there are some difficult decisions, to take such decisions.
In Pakistan, there is strange tendency that things are presented in a distorted way. Some issues are continuously in discussion with IMF as it has a central place in world's financial system. World Bank and Asian Development Bank look at relations of a country with the IMF, and devise their own policies accordingly. "We have very good relations with the IMF. As Covid-19 breakout, the IMF went to its board and got approved $ 1.4 billion concessionary lending for Pakistan," he said. Dr Sheikh maintained that now the government is free from budget exercise he will update media on the next IMF review within next few days or weeks in detail.
The adviser added that the government would be required to meet debt obligation and allocated Rs 2.9 trillion for this purpose in the budget for the next fiscal year and if this obligation was not required to be met then allocation for Ehsaas programme could have been increased 20 times.
The government effort is to reduce expenditure and it has not been taking loans to meet current expenditure but to make repayment of past loans, he said, adding that the expenditures of Presidency and Prime Minister's House have been reduced and the government decided not to impose any new taxes. The government also reduced government expenditure through belt tightening and allocation for development programme has been increased by Rs 100 billion to Rs 650 billion for next fiscal year as opposed to what has been utilized in the current fiscal year.
He said that duty on 1623 tariff lines has been abolished in the budget, reduced on 200 tariff lines and regulatory duty on 166 tariff lines has been reduced to lower the cost of doing business. He said that around 10 kinds of withholding taxes are being abolished and withholding tax at import stage is being reduced from 5.5 percent to 1 and 2 percent. Capital Gain Tax (CGT) on construction is being reduced by half and federal excise duty on cement has been reduced by 25 paisa per kg.
The adviser said the government has abolished Rs 40 to Rs 50 billion duties and apart from relief in taxes/duties laws are also being changed so as to facilitate businesses and government would monitor the situation during the entire fiscal year and take policy measures and respond to any inadequacy.
Dr Sheikh said that all institutions from the IMF to World Bank, Asian Development Bank (ADB) and Islamic Development Bank and others are standing with Pakistan because they believe that the government wants to follow fiscal discipline and help the people of the country.
While enumerating government's achievements during the nine months of the current fiscal year, he stated that the economy was set stability path after tough decisions were taken by the government before the coronavirus. The Minister said that the government repaid debt of Rs 5,000 billion after coming to power on the loans taken in the past and would be paying Rs 2700 billion from available resources.
He added that the government squeezed its expenditure. It did not borrow anything from the State Bank of Pakistan nor did it issue any supplementary grants and achieved for the first time in its history primary surplus. Sheikh further stated that growth in revenue was 17 percent during the first nine months of the current fiscal year despite the fact the revenue at import stage was compromised due to contraction in imports. Domestic growth in revenue was 27 percent. Another achievement, he said was contraction in current account deficit from $20 billion to$ 3 billion and allocation of Rs 200 billion for vulnerable segment of society, while increases in non tax revenue amounted to Rs 1.6 trillion against the target of Rs 1.1 trillion for the current fiscal year and because of all these measures the international community acknowledged Pakistan's efforts and seriousness in bringing about fiscal discipline and International Monetary Fund (IMF) board recognized Pakistan's efforts while Moody's upgraded our rating and stock exchange was declared as best performing stock market in 2019 by Bloomberg.
The adviser added that foreign direct investment increased by 137 percent but government's efforts to bring about stability were hamstrung by Covid-19 which affected the entire world and IMF projected a loss of around 4 percent in world GDP on account of this pandemic.
Pakistan's economy also suffered Rs 2 trillion GDP loss and from Rs 500 to Rs 800 billion in Federal Board of Revenue tax collection. As markets, transports and industries were shut, poverty and unemployment increased in the country. The government provided stimulus package of Rs 1.3 trillion to offset some impact of coronavirus and provided cash disbursement to 16 million people to support them financially and paid utility bills of small industries and deferred payment of electricity bills besides extending other relief measures for businesses.
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