Foreign exchange reserves: Tola underscores need for ‘charter of economy’

LAHORE: Minister of State and Chairman, Reforms and Resource Mobilization Committee Ashfaq Tola has said that the foreign exchange reserves crisis require a charter of economy at the earliest.

He was speaking at the Lahore Chamber of Commerce and Industry. LCCI President Kashif Anwar and Senior Vice President Zafar Mahmood Chaudhry also spoke on the occasion.

The Minister of State said that we have been talking about charter of economy for a long time. This is our dream that will soon be realized. He said that the stakeholders should sit down with ICAP, suggest solutions and bring up the issues one by one and get them resolved.

He said that it would be a great favor to the country if someone invests in solar energy. At the moment, solar installation is being incentivized in America. If our government cannot provide incentives, at least markup should be reduced.

The minister said that the IMF conditions are very strict this time. We are not fully aware yet and would find out what’s involved next. He said that the major stakeholders, including the chambers, should come up with a proposal for the reforms and resource mobilization. All the chambers should sit together, draw up a charter of economy and a charter of budget.

He said that we can host the stakeholders at FBR and the issues can be discussed one by one with the FBR team. He agreed that there should not be multiple audits. We are addressing this issue with the help of Reforms and Resource Mobilization Commission. He said that the revenue collection and ease of doing business are two different things. He said that there are issues of size and sales as far as Tier-1 is concerned.

“We want no one in Pakistan to say that such a person is paying less tax and I am paying more,” he said adding that we have to decide how much tax we have to pay. Regarding amnesty, he said that we do not have financial material. It has been a while since we started using internet, digital banking and credit cards. Most of our economy is a cash economy. The best amnesty could be a dollar amnesty but that seems unlikely given the IMF’s conditions. He said that we have 100 million unique subscribers who pay withholding tax on mobile but since they are not filing and FBR is also afraid that if they file, they will ask for refund from us. When a tax collector comes to up, people get scared which should not be.

As far as cotton land is concerned, Pakistan has the lowest production rate in the world. Check the price of cotton and sugarcane. If the international price is imposed on these commodities, then they will not have to be subsidized.

He said that taxation of the traders is not an issue. The problem is agricultural tax. He said that we do not have an export surplus to increase exports. He said that our raw materials are import-base as we have converted our agricultural land into housing societies. The examples of Multan’s housing societies is before us.

The Minister said that the production of wheat is 1.7 million per hectare annually as compared to five million tons in India. Even we double our production today, we will produce 26 million tons annually while our requirement is 36 million tons. He said that we also export four to five million tons. If our production is double from this, it will be 52 million tons annually.

He said that we have to increase our productivity and need to work on local import substitutions. He said that energy prices in Pakistan are extremely high. This is because we are generating electricity from imported fuel. Due to falling value of rupee and import bill, our budget deficit is increasing.

He said that Pakistan has a huge parallel economy. By increasing the interest rate, it slows down and the bank have to give an additional interest of around Rs 640 billions to the banks. He said that we are suffering from the autonomy of State Bank. We have had a session with the finance minister on withholding tax and refund. He said that we want refunds to be given to everyone. Current account deficit should not be less than 2 percent of GDP i.e. 8 billion dollars. The IMF does not trust on us due to which our program is delayed.

LCCI President Kashif Anwar said that the ongoing negotiations and board meetings with the IMF Staff Level Agreement will be signed soon, which will see an improvement or at least a stabilization in the country’s economic situation.

He said that the country is facing the recent foreign exchange crisis due to trade deficit, as a result of which banks are having problems to open LCs. Thousands of import containers are still stuck at the port, incurring detention, demurrage and port storage charges to the trading community with each passing day.

The LCCI President said that our industries have to import a lot of raw materials, essential components and various machinery which are not available in the country, on which they have to pay 100 percent cash margin and profit, regulatory duty, customs duty and additional customs duty, which should be eliminated. Apart from this, the issues of pending refunds and multiple audits are pending along with reducing the rate of withholding tax for businesses. He said that our industries are also facing problems like policy rate which has reached to 17 percent and high energy cost due to which the business cost has also increased a lot.

“We have always insisted on increasing the tax base. We have suggested the government to immediately announce the Declaration Scheme so that Undeclared Foreign Reserves can become part of our economy”, the LCCI President added.

He said that keeping in view the economic situation of the country, Lahore Chamber has also informed the leaders of almost all major political parties of Pakistan through letters that LCCI has formulated some important proposals to fix the current economic situation of the country. LCCI has requested them to share their economic manifesto with us so that we can help create a charter of economy that expresses the position of all political parties. He requested the State Minister to play his role in this regard so that all political organizations cooperate with us. There is no doubt that political stability is essential for economic stability.

Copyright Business Recorder, 2023