Government securities, guarantees for SOEs attract 70 percent investment of banks: Senate body told

The government securities as well as guarantees for State-Owned Enterprise (SOEs) attract around 70 percent investment of commercial banks against the required 18 percent, said Secretary Finance Dr Waqar Masood on Friday. Secretary Finance said that 38 percent of banks' investment is in government bonds and papers in addition to a considerable amount in government guarantees for SOEs.
The Secretary added that banking sector investment in the two accounts make up for around 70 percent of their total investment. The Secretary Finance was responding to members' proposals in Senate Standing Committee on Finance. The committee meeting was chaired by Saleem Mandviwalla to finalize senators' recommendation to the Finance Bill 2015 for the next fiscal year.
Waqar Masood further stated that fiscal deficit is being reduced through a reduction in government reliance on borrowing. He also maintained that the provincial surplus always remains in the accounts of provincial governments and federal government cannot utilize it. Secretary Finance also informed the committee that Federal Board of Revenue (FBR) shares tax collection position with the Finance Ministry at the end of every month and subsequently tax collection figure is passed on to the Central Bank through fax for transfer of due share of provinces in tax collection. He added that any shortfall in revenue collection equally impacts all the provinces. The committee decided to summon National Database Registration Authority (NADRA) officials to explain about 3.2 million potential taxpayers as per their data base. A NADRA database of 3.2 million non-compliant individuals with the potential to pay taxes exists and is not being used effectively by FBR to widen the tax net and the reasons for this failure may be brought before the Senate Standing Committee on Finance for its deliberations.
Secretary Finance, in response to a committee's proposal against withdrawal of subsidies for power sector, stated that the government has not withdrawn subsidies on electricity. He added the tariff differential subsidy for next fiscal year is based on tariff determined by the National Electric Power Regulatory Authority (NEPRA). He said that there would be no increase in tariff and tariff for 2013-14 would continue in 2014-15 as well.
The committee's proposal was that the withdrawal of power subsidies is a measure that will pass on to the common man the burden of the inefficiency and ineptitude of the government power sector. Such a withdrawal will crush the common man. Instead of withdrawing these subsidies it is recommended that serious and urgent power sector reform may be undertaken. The members also decided to refer the issue of not incorporating Tax Reform Commission regarding structural reform of the FBR in the Federal Budget. The committee members stated that the Tax Reform Commission constituted by the government has made certain recommendations in its Interim Report but these were not recommended in the budget for the next fiscal year.