The Advisor to Prime Minister on Finance, Shaukat Tarin, has said that the government will spend Rs 40 billion during 2009-10 financial year for providing incentives to value-added textile sector, the details of which would be given in the trade policy.
Addressing a post-budget seminar here on Wednesday, he said that the government had accepted most of the demands of textile exporters in the budget. He said the government has allocated substantial amount of Rs 60 billion in the federal budget to assist the industries involved in value-addition, small and medium enterprises, and revival of industrial activity in the country.
"The manufacturing sector should show some patience, as the government has declared next fiscal as ''year of industrial revival''," he added. The Advisor said that the government would provide much support to the value-adding sector, which would also be available to other sectors.
The export refinance has been increased from last year''s Rs 140 billion to Rs 250 billion in the 2009-10 budget. The SMEs would have access to credit through Rs 10 billion credit guarantee fund, while the new entrepreneurs would get venture capital, without collateral, from a separate Rs 10 billion fund established for this purpose, he said. He said that the government was fully aware of the fact with regard to declining industrial production and would take all possible measures to remove all irritants that pushed up the cost of business.
He assured the manufacturers that the government has intention to increase the incentive package by another Rs 10 billion, if required. The issues like research and development grant and other facilitation have already been addressed in the textile package.
He assured the business community of removal of irritants in the tax laws relating to powers of income tax officials, for which the trade bodies, associations, other stakeholders and the public sector departments would be taken into confidence.
He held inflation responsible for seven percent banking spread and said that some larger banks have a larger spread of up to 10 percent, which is unjustified. The State Bank has been asked to negotiate with such banks for reduction in their spread. He said the economic consolidation has been achieved in first year while the next year would be more comfortable.
He said that interest rate would further come down by 100 basis points (bps) which would help reduce inflation in the country. The government will take along the representatives of trade and industry and a business council comprising 50 businessmen from different regions and trades would be constituted which would meet the President, the Prime Minister and the Finance Minister once in a month.
The cross subsidy on gas would be removed from next fiscal year that would reduce the energy cost of the industry. The government is also considering to levy carbon tax on CNG, he added. "The agriculture sector must be brought under the tax net in 2010-11, and I will quit my office if I could not do this" he added.
The CVT imposed on property is a regressive tax that would be changed to capital gain tax in 90 days after finalisation of National Finance Award, in consultation with the provinces, he added. Former federal finance minister Dr Salman Shah criticised the present government for its economic policies and said that the budget was based only on presumptions.
About further loans from IMF, in case of failure of Friends of Pakistan to fulfil their donation pledges, would be very costly even if the loan was immediately returned, as full IMF charges would have to be paid. There would be a shortfall of about Rs 300 billion in the resources calculated in the budget. Revenue target, he said, would not be met. He said that circular debt in October 2008 was Rs 50 billion, and increased to Rs 190 billion in 10 months.