Minister worried over BoP position

RECORDER REPORT

ISLAMABAD: Finance Minister Dr Abdul Hafeez Sheikh on Thursday underscored the need for a cautious approach towards balance of payment (BoP) position due to rising oil prices in the international market.

Briefing the National Assembly Standing Committee on Finance here on Thursday, Hafeez said that although vulnerability of foreign exchange reserves had not crossed the crucial point, the situation required the government to think long and hard as balance of payments had been under pressure due to increase in oil prices. The Minister said that exports and remittances had been providing a valuable support to the BoP.

Hafeez said the government’s performance had been very poor especially in the area of power sector as it failed to control subsidies on electricity. The government had been unable to attract foreign direct investment. The Minister said that transfer of resources to the provinces under the last NFC Award had made the federal government helpless on fiscal side. The Minister said the dependency on oil and food import and government expenditure more than revenue generation had been responsible for inflation in the country. Hafeez said that Pakistan had been experiencing a “double-digit phenomenon” for the last 50 months, which was no good omen for the economy. However, he said inflation decreased to a single digit in December 2012.

The Minister said the government’s priority was to move towards only two taxes - income and sale tax - from the next fiscal year and there would be no increase in tax rate whereas the existing number of 17 slabs of income tax would be reduced to 5 slabs. The Minister held out an assurance to honest taxpayers of a reduced tax rate from the next fiscal year.

He informed the committee that the government would continue with the policy of phasing out of federal excise duty in coming budget. In the last budget, the FED was abolished on many commodities and the same policy would be followed in the next budget. The FED would be further abolished from a few more items; and it would be completely abolished from all the items in the next two to three years.

The Finance Minister said the economic team was curiously looking for suggestions of parliamentarians to make the budget-making process more effective and in accordance with the desires of the common man. He also admitted that in various sectors, the government’s performance was not satisfactory but it was largely because of the factors which were beyond its control such as floods, rising oil and other commodities prices in the international market and global recession. The Minister described the current fiscal year somewhat challenging as certain things did not work in accordance with the budgetary projections.

During the committee proceedings, MNA Munir Orakzai protested against non-release of funds to Fata during the last four years. The Minister assured him that the concern of Fata parliamentarians about the release of funds would be addressed.