Coordinator to PM speaks about criticality of current IMF programme

ISLAMABAD: Coordinator to Prime Minister on Implementation and Monitoring Rana Ihsaan Afzal on Tuesday said the current government was undertaking serious fiscal regime reforms to ensure completion of the International Monetary Fund programme as the last lending facility opted by the country.

He was speaking at a session titled, “Debt, Debt Justice and Development” on the second day of the Sustainable Development Conference organised by Sustainable Development Policy Institute (SDPI) in collaboration with the Climate Change Ministry.

Afzal said the government under Prime Minister Shehbaz Sharif’s leadership has set an ambitious target to complete this IMF programme that would help the country envisage sustainable economic growth.

Afzal termed the country’s consumption-based economy as a precursor to its increasing external borrowing.

However, due to the already tightening revenue guards in place, the government had closed the window of another spike in taxes for the next budget, he added.

The government, he said has focused on the tax evaders, particularly, in the high income sectors with an internal target of tax collection to be met this year by the federal government intended to boost internal revenue collection.

In the fiscal architecture correction, he said the government has initiated contributory pensions among the civil servants that would be expanded to the defence division in the next phase.

PM’s aide Afzal underlined that correct public sector development programme (PSDP) is critical to ensure right fiscal allocations for implementable financial strategies.

“The current PSDP demanded Rs3 trillion and only 1.1 trillion was secured that put all the projects in a challenging situation,” he said.

On the external debts, Afzal said the government has envisioned a different strategy as compared to the previous policy of import substitution that limited local exports. However, it will help in reforming the exports and providing an enabling environment for spike up in the exports.

The PM’s aide underlined that the country is undergoing a challenging and politically-polarised environment that made reforms an uphill task for the sitting government, whereas, it has directed all the ministries to come up with specific reforms’ agenda for paradigm shift in fiscal and administrative governance.

Mohsin Mushtaq Chandna, DG (Debt), Finance Division, said climate change, geopolitical tensions, protectionism and social discrepancies were contributing to debt increase. The debt suspension initiative has helped give a breather to Pakistan’s economy which was momentary, he said, adding, “in case of all developing countries the common factors like frequent periods of economic and political instability, high fiscal deficit, geopolitical tensions and political economy are the drivers of deteriorating economic outlook and growing debts at an alarming rate.”

He suggested that increase in revenue collection with inclusion of new sectors eligible to pay tax will help create a favourable space alongwith increased exports and a sustainable primary surplus to provide growing opportunities for the economy of Pakistan.

“Pakistan is expected to achieve Rs 12.9 trillion in tax collection with big primary surplus by the end of the current fiscal year,” he said.

Member of National Assembly (MNA) and Muttahida Qaumi Movement-Pakistan (MQM-Pakistan) leader Dr Farooq Sattar pointed out that a state of denial among the government, political parties, and the opposition was not allowing policymakers to initiate curative measures for economic revival as the country’s economy was living on symptomatic solutions.

After allocating Rs 8,000 billion for provincial finance fund; the federal government will be left with Rs10,000 billion for debt servicing at the federal level. The extravagant expenditures from debts and economic stress borne by the masses needs to be addressed, he said.

Dr Sattar said, “A national agenda is the need of hour for all the political parties to chalk out a solution unanimously as the policymakers will have to find a solution through inclusive and sustainable approach.”

He recommended that indirect taxes were proving to be futile in Pakistan’s economic revival experiment which was 60 per cent of the total revenue collected directly by the government.

“Tax base has to be broadened and non-taxpayers should be brought into the tax net, then we can convince the traders fraternity in Lahore and Karachi to declare their exact incomes gradually,” he said.

For reforms agenda, the MQM-Pakistan MNA said sociopolitical and socioeconomic reforms were necessary to ensure a charter of social, political and economic reform agenda. He urged all the political parties to join their heads for a consensus-based inclusive strategy for fixing the economy.

Imtiaz Ali Solangi, an FBR official said the country needed to initiate planning for debt restructuring as it involves negotiations with stakeholders, stock take scenarios and multiple negotiations with lenders.

“We need to study debt retirement at reduced cost with maturity period. However, the Foreign Direct Investment (FDI) is not up to the mark and we have to make conducive environment to increase FDI to increase exports to reduce current account deficit,” Solangi said.

“Revenue generation is 9-10 percent against the recommended 15 percent. If we collect the recommended revenue then it will provide $20 billion extra to be invested in Pakistan,” he said.

Deputy Executive Director, SDPI, Dr Sajid Amin Javed, said debt discussions were limited to staggering numbers and statistics, adding that the governments did not pay taxes but rather the masses were bearing the brunt of increased taxes and revenue collection decisions.

Dr Hamza Ali Malik, Director MPFD, UNESCAP, said the economic and fiscal mismanagement were the main reasons for Pakistan’s poor debt management, whereas, liquidity versus solvency issue in the country needed further probe to devise clear strategy post debt consumption.

PRIME Institute Executive Director Ali Salman said in debt, restructuring and debt justice statistics alone could be misleading as under such a matrix, it had to be economically and politically sustainable.

Ammara Durrani from the UNDP said the current global financial architecture had been repeatedly discussed by UN and declared dysfunctional for countries like Pakistan.

In another session on “Driving Special Economic Zones (SEZs) Development Under CPEC 2.0: Opportunities for Sustainable Industrial Growth,” representatives of Chinese businesses called on the Pakistani government to prioritise one-window operations, ensure continuation of supportive policies, and enhance security for investors to foster industrialisation and business growth in the country.

Wang Huihui, chairman of the China Chamber of Commerce and Industry in Pakistan (CCCI), suggested that Pakistan must provide a secure environment for the Chinese private sector to invest in the country.

He also emphasised that Pakistan could benefit from learning about China’s Green Special Economic Zones (SEZs) model for sustainable economic growth.

The CCCI chairman said Pakistan must create a secure investment environment to encourage Chinese private-sector participation. He specifically pointed to the importance of learning from China’s Green SEZ model, which emphasised eco-friendly development and sustainable practices, including the use of renewable energy.

Mushahid Hussain, a Pakistani politician, and chairman of Pakistan-China Institute (PCI), underscored China’s pivotal role in global economic growth, noting that 30 per cent of worldwide growth came from China.

He praised China’s dual focus on connectivity and green development, highlighting the country’s leadership in technological fields such as AI, robotics, and 5G.

He also pointed to China’s regional expansion, including its $400 billion partnership with Iran and the construction of the Wah Khan Corridor, which will link not only Pakistan but other Central Asian states.

Executive Director of the PCI Mustafa Hyder Syed also echoed calls for an autonomous body to oversee SEZ development in Pakistan.

He argued that bureaucratic instability, with frequent changes in ministers and officials, hinders progress in the SEZ sector.

Copyright Business Recorder, 2024