ISLAMABAD: Former finance minister Dr Hafiz Pasha, Friday, has said that the country has a fiscal space to lower the electricity tariffs instead of increasing, saying that the continuous increase in power tariff can endanger industrial growth momentum, which contributes around 60-70 percent of tax revenue.
While participating in a pre-budget 2021-22 webinar organised by the Pakistan Institute of Development Economics (PIDE) here, he said that if Pakistan failed to bring structural reforms as committed with the International Monetary Fund (IMF), the ongoing IMF program could face suspension.
Pasha said that Pakistan’s inability to fulfill the conditionalities of the IMF programs will have serious financial consequences for the country as in the next three years the country has to pay $40 billion, which desperately needs IMF program.
He said that Prime Minister (PM) Imran Khan’s ongoing visit to the Kingdom of Saudi Arabia (KSA) may result in resuming stalled oil facility on deferred payments but the country needs massive finances to manage the debt requirements and the budget deficit.
He said that the KSA, at present, was also facing some sort of financial problems, adding that in the near past the Kingdom not only suspended the deferred oil facility to Pakistan but also got back $1 billion from Pakistan.
Pasha said that the KSA may restore the deferred oil facility to Pakistan during ongoing visit of the PM and other officials, but this facility will not be sufficient to meet the $40 billion debt obligations the country is facing in the next three years.
Pasha said that if the new financial managers of the country are going to re-negotiate structural reforms and tough conditions with the IMF, the global lender could suspend the programme as it did on the eve of first wave of COVID-19 pandemic.
He explained that the estimated $40 billion debt obligation was given by the IMF in its latest report.
Dr Pasha opposed the IMF demand for doing away with GST exemptions and said that these tax exemptions were related to agriculture and medicines.
He said that there should be zero tax on the fertiliser sector.
He said that the low GDP growth in Pakistan may result in pushing 20 million people below the poverty line as with such a growth rate job opportunities are not creating.
He added that Pakistan’s economy needs up to 6.5 percent growth rate to avoid falling of more people below the poverty line.
He said that the country’s economic situation requires huge spending on the Public Sector Development Program (PSDP) but within past nine months of the ongoing fiscal year, the government has only released Rs277 billion to the PSDP projects against 494 billion demands. Pasha said that completion of developmental works is a key to provide job opportunities to the masses, adding that completion of old and new developmental schemes need huge financial resources but the present financial situation of the national kitty was unable to fund these projects.
Giving his recommendations for the upcoming budget 2021-22, Pasha said that at present, Personal Income Tax consists of 12 slabs which needed to be reduced down to five to six slabs in the upcoming budget.
He further recommended that the rate of highest income bracket of 35 percent should be brought down from Rs75 million to Rs15 million while the minimum income taxable ceiling should be taken up from Rs600,000 to Rs750,000 per annum.
Pasha said that if the government is taking these taxation measures in the next budget the Federal Board of Revenue (FBR) could generate up to Rs350 billion additional taxes.
He also suggested the government to instead of fixing Rs6,000 billion tax collection target as per the recommendations of the IMF it should revise it down to Rs5,400 billion.
Copyright Business Recorder, 2021
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