‘China will help secure IMF loan’

ISLAMABAD: Federal Minister for Finance Muhammad Aurangzeb said that China would support Pakistan’s negotiation with the International Monetary Fund (IMF) and would play its role in securing approval from the Fund’s board.

He said that the government has taken drastic measures to improve the country’s economy in the right direction with a special focus at expansion of tax net.

Pakistan opted for the IMF programme to bring micro-stability in the country. And China will support Pakistan in securing approval for the IMF agreement. A total of Rs 68 billion have been refunded to taxpayers by the Federal Board of Revenue (FBR) from first July and trader-friendly policies are being chalked out.

China briefed about govt-IMF engagements

The government will introduce legislation in the Parliament to impose tax on agriculture sector and the prime minister is personally monitoring reforms in the FBR, the finance minister expressed these views while addressing a news conference on Sunday after China visit.

He said that Pakistan requires a three to five-year extension in the maturity of $12 billion debt from the Kingdom of Saudi Arabia, China, and UAE as part of confirmation before securing approval from the IMF’s Executive Board on a fresh bailout package.

The minister ruled out the possibility of seeking incremental foreign loans from bilateral partners and said that the external financing gap was quite “manageable”. Islamabad is only seeking re-profiling of its foreign deposits of $12 billion including $5 billion from KSA, $4 billion from China, and $3 billion from UAE for a three to five-year period. The IMF wants external financing assurances for 37- month period under $7 billion Extended Fund Facility (EFF).

The minister also informed that Islamabad has started process of re-profiling of Chinese Independent Power Producers (IPPs) debt for seeking extension in maturity and now Chinese consultant would be hired to move towards achieving the desired objectives. The Chinese IPPs outstanding repayment stood at $15.4 billion till 2036 and Pakistan is making requests for securing extension in debt tenor of five to eight years period.

“There is need to understand very ‘delicate’ issue carefully as Pakistan does not seek any debt restructuring or haircut but it has requested for extension in tenor of maturity of outstanding debt on account of both foreign deposits and Chinese IPPs debt” he stated.

The minister said that there would be nine Chinese IPPs including one transmission line as they could not go ahead with knee jerk approach. He said that the joint working groups would be established to create a win-win situation for both sides. It would be long process for discussing with individual IPPs. The issue of their Rate on Equity and dividend so discussed all these issues in details, he added.

To a query, he stated that the annual expenditure of ministries stood at Rs 890 billion and if 20 to 25 percent reduction should be achieved in terms of reducing their financial burden.

The minister also confirmed that Pakistan was discussing $600 million commercial loan from Chinese banks. He said that Pakistan would launch Panda bond whereby they intend to register $1 billion out of which $150 to $200 million would be capitalised at the first phase.

About the IMF programme, the minister said that the discussion with the IMF had remained positive and constructive and all the set benchmarks were achieved.

He said that China, Saudi Arabia and the United Arab Emirates have always extended their support for Pakistan for its economic growth and development.

The minister said that he visited China along with the energy minister and held discussions on different aspects of bilateral trade and economic cooperation including local energy requirements and launching of Panda bonds in the Chinese markets.

Answering a question, he said that during the recent visit to China re-profiling of energy sector loans was also discussed. He said that they discussed the conversion of energy plants into coal and other aspects for affordable energy generation during different high-level meetings.

He said that in the discussion, the Chinese authorities acknowledged and ensured that our issues are registered with the right forum. He said that the process has to be followed to take them forward. He said they also wanted to help the country in terms of re-profiling.

The minister said that China is ranked among the world’s biggest capital markets and Pakistan plans to issue these bonds to diversify its funding sources and strengthen its foreign exchange reserves by attracting Chinese investors.

About energy, the minister said that Prime Minister Shehbaz Sharif in his visit to China had also discussed the local energy requirements with the Chinese top leadership. He said that the prime minister urged them to evolve a mechanism for extending their support to overcome power supply needs for the socio-economic development of the country.

He said that reforms are being done in the FBR and in this regard, weekly meetings are held under the chair of Prime Minister Shehbaz Sharif. He said that putting fewer burdens on lower income class is the government’s top priority.

Expressing gratitude to the chief ministers of all four provinces for supporting government’s tax reforms agenda, the finance minister expressed hope that they will introduce tax legislations for inclusion of the agricultural sector in the taxation regime.

He said without including untaxed and under tax community into tax regime, we cannot achieve certainty and ease of collection that is vital for economic stability.

The minister said notices will be sent through a centralised system, while field formations will be authorised to collect taxes, accordingly.

He said that to realise the 13 per cent tax-to-gross domestic product (GDP) ratio, it was prerequisite to take measures for the simplification of tax returns and facilitating the tax pairs to achieve full compliance. He said that the government has launched Tajir Dost Scheme for voluntary tax compliance that offers benefits to unregistered businesses.

Mentioning the details of tax evasions and frauds, he said we have identified a tax potential worth Rs600 billion that was not collected, out of which, one billion rupees has been recovered so far.

In customs, through misclassification, tax worth around Rs50 to 200 billion has been identified, he said.

The minister said the government is also working on the simplification of the tax processes to facilitate the business and salaried persons. Through this simplified process, they will be able to respond to our system in a very simple and easy manner without the involvement of any tax consultant, he said.

He said that the expansion of the tax to other sectors like retailers, real estate, builders and developers and agriculture would help to create a space to provide relief and reduce the burden from the existing taxpayers. He said that the government was fully determined to bring the un-taxed and under-taxed sectors into the tax net.

The minister said that through digital data analytics, the FBR has identified about 4.9 million income tax non-filers and they were pointed out on the basis of basic data regarding travelling abroad, a number of vehicles and others.

Finance Minister Aurangzeb said that at the initial stage, the government is going to right-size five ministries, including Kashmir and Gilgit-Baltistan, SAFRON, Industries and Production, Information Technology and Telecom and Health have been short-listed in this regard. He said Prime Minister Shehbaz Sharif will take the final decision to this effect.

He said that federal government has collected all data on 4.9 million non-filers’ assets, houses, foreign travel, and cars and will start issuing notices to enforce tax regime. He mentioned that non-filers would no longer receive direct notices from tax officers, reducing harassment and ensuring a centralised notification system.

He said this data, which was collected from the National Database and Registration Authority (NADRA) and other sources, will not be used to harass non-filers but to bring them into the tax net. He said that the notices will be issued centrally, with field formations only contacting individuals where necessary. Effective enforcement action will be taken against tax defaulters, he added.

He stated that efforts are being made to ease the tax burden on the lower-income population while simplifying the taxation process for traders.

The minister criticised tax defaulters for not being loyal to the nation, urging that tax payments are crucial for economic stability. He highlighted the need to streamline government expenditures and discussed potential mergers of certain ministries.

He also mentioned detailed discussions with Chinese officials on energy, including the conversion of coal power plants to local coal and the issuance of Panda Bonds.

He said Chinese ministers praised Pakistan’s negotiations with the IMF and assured support for the agreement’s approval by the IMF board.

The finance minister stressed the importance of simplifying tax processes, comparing it to the straightforward tax systems in other countries, where annual forms provide clear tax details without the need for legal assistance.

He said without including untaxed and under tax community into tax regime, we cannot achieve certainty and ease of collection that is vital for economic stability.

The minister also mentioned that positive discussions on CPEC Phase-II are ongoing, and working groups will be formed soon to further these initiatives.

Copyright Business Recorder, 2024