Govt seeks easing of conditions

• Tarin urges IMF to give ‘us some space’

ISLAMABAD: Finance Minister Shaukat Tarin said on Wednesday that Pakistan will not leave the International Monetary Fund (IMF) programme rather will try to convince them that there is no space for increase in power tariff and taxes as people are now tired.

Speaking at his first media appearance after assuming the portfolio of the finance minister, subsequent to departure of his predecessor Dr Hafeez Shaikh, Shaukat Tarin disclosed that the IMF has already been asked to give some space and instead of setting targets, "let us do the same things in our own way".

We would also ask the IMF when productivity and business would increase, revenue collection would also increase and circular debt would also be reduced through other means and not increase in power tariff.

The finance minister said that the IMF would be told that the increase in revenue collection was in Pakistan's own interest to provide incentives to various sectors of economy to achieve higher growth. “We will achieve the IMF target in our own way and the work has been started on revenue envelope through innovative changes as every year one to one and a half percent increase, instead of a big leap, will be helpful to increase the tax-to-GDP ratio,” he added.

He also spelled out his plan as the finance minister to negotiate with the IMF and how he wanted to achieve growth, and stated that the PSDP allocation would be fully utilised.

The minister said that the government plan is ready and it would be rolled out from upcoming budget by addressing the harassment of taxpayers by the Federal Board of Revenue (FBR) to create fiscal space, so as to provide incentives to the industry, agriculture and housing sector for achieving higher growth.

He said the agriculture sector would be a priority of the government to increase production and would try to make the government an employer of choice.

The minister said that revenue, power sector price stability and growth would be the key challenges for the government and he would use SMEs, Kamyab Jawan programme, and Kamyab Kisan programme to bring prosperity at grassroots level, because the trickle down model has failed.

The minister said the government would introduce some programmes in the upcoming budget to lessen or remove the prevalent harassment of taxpayers by the Federal Board of Revenue (FBR).

The power sector is another “Gorilla (monster) in the economy and its capacity payments are increasing and the power would not be fully utilised even the economy growth over 7.5 percent per annum and capacity payment would still be a challenge.”

The finance minister said the Extended Fund Facility (EFF) programme was frontloaded due to a hostile environment in the surroundings compared to 2008 friendly environment of Stand By Arrangement (SBA) owing to war on terror.

Yet, he said, the present government had followed the difficulties for stabilisation till the Covid-19, which is a major threat.

Tarin said that the LSM is showing growth, all other crops except cotton, are looking good, and remittances and revenue are increasing.

The minister said that revenue growth was 47 percent in March 2021 with a net growth of 40 percent compared to 2018-19 and growth in revenue during April was 92 percent compared to the same month a year before but last 10 days lockdown consequent to Covid-19 badly affected the growth in revenue.

The minister also referred to the 1970s economic planning that led the country to 4th largest growing economy at that time, and stated that the countries such as South Korea and others had benefited from Pakistan’s economic plans.

We have decided to revive the planning and formed sub-groups of Economic Advisory Council to prepare short-, medium-, and long-term plans.

The minister regretted that no attention was paid to price stability, which would be now foremost priority of the government and consequently, inflation was not coming down.

He also spoke about the huge difference between farmers to retail price, and pointed out that the middleman was minting 40 to 60 percent profit.

He said such a huge margin was horrendous, and the prime minister wanted that prices should not be out of reach of people.

Tarin said that social protection would be another area that would be expanded and fiscal sustainability would be of great importance through revenue and a reduction in cost as devolution of ministries that was agreed in 7th NFC award had not been done.

He said that the expenditure side is equally important.

He said that the agriculture sector is a “major industry” of the country and the government focus would be to support it as it remained under-spent in the past, and consequently, livelihood of 62 percent people was affected and the country was turned from a food surplus to a food deficit country.

The finance minister also pointed out that Pakistan exports are fragmented and are needed to be consolidated and the government would have to create a vehicle to consolidate exports.

He regretted that at present there is zero foreign direct investment in export industry and the China-Pakistan Economic Corridor (CPEC) would be used for asking the Chinese to outsource some industry in the special economic zones (SEZs) to manufacture and export from Pakistan.

The minister said there is great potential in information technology (IT) and it can be a game-changer for the country in few years if proper attention is paid to it.

Mortgage financing is another area that requires attention as mortgage loan size in Pakistan is only 0.24 percent, which would be increased and there would be action in state-owned enterprises (SOEs) and management from the private sector would be brought in and financial sector credit for farm sector, SMEs and small business is required to be increased from a dismally low level as over 70 percent lending by the financial sector is to the corporate sector.

He agreed to a question that political stability was important for economic stability, and stated that his “good relations” with many people may be helpful in this regard.

Reuters adds: Pakistan is in talks with the International Monetary Fund (IMF) to try to ease "tough conditions" on a $6 billion loan, Finance Minister Shaukat Tarin said on Wednesday.

"The targets they have given us, that is tough... We have talked to them and they are very sympathetic," Tarin said, referring to a loan agreed in an IMF programme that Pakistan entered in 2019.

Pakistan did not want to leave the programme but had asked the IMF to give "us some space," Tarin told a news conference.

Elaborating on Pakistan's experience with the IMF's Extended Fund Facility, Tarin said Khan's government was already struggling with the stabilisation of the impoverished economy when the coronavirus pandemic hit the country hard.

Pakistan is seeing record numbers of COVID-19 deaths and infections, and so the country is to shut non-essential business and transport for almost two weeks starting on May 5. The aim is to contain the spread of new coronavirus infections during the Eidul Fitr Muslim festival when hundreds of thousands of people will be offering mass prayers.

"It has got tough conditions," Tarin said of the IMF's benchmarks, which include tax collection reforms and measures to generate funds from other areas to bridge its budget deficit.

No immediate response was available from the IMF's country office.

Pakistan has raised electricity prices several times since the IMF programme began.

"We don't have room for tariff hike," Tarin said, adding that the government was going to introduce more tax reforms in the upcoming budget.

"Our people are really sick of rising inflation," he said.

The budget for 2021/22 fiscal is just weeks away, and the IMF approved a $500 million disbursement in March for budget support after competing a review of the loan programme that had been delayed for over one year.

The South Asian nation of 220 million people posted consumer price inflation at 11.1% in April, the highest in 11 months.

With -0.4 GDP growth last year, Pakistan has revised growth projections to 3% for fiscal 2020/2021. The IMF however says GDP is likely to grow only at 1.5%, suggesting the country may have to dampen its economic growth expectations.

Copyright Business Recorder, 2021