Former Advisor to Prime Minister on Finance Dr Hafeez Pasha said that budgeted fiscal deficit target of 4.3 per cent for the current fiscal year is unrealistic due to expected shortfall in revenue collection and around Rs 100 billion fiscal impact of farm package on budget.
Speaking at Aaj TV programme ''Paisa Bolta Hai'' with Anjum Ibrahim, Hafeez Pasha stated that Prime Minister''s farm package involves a fiscal impact of Rs 146 billion but federal government budgeted Rs 25 billion as fertiliser subsidy in the budget for the current fiscal year. The federal government expects to share the announced cash support on cotton and rice with the provinces. The rest of Rs 341 billion announced total farm package is credit which would not impact on the budget. He said as per conservative estimates, the fiscal impact of the farm package on federal and provincial budget would be around Rs 100 billion, which can not be absorbed in existing fiscal deficit.
This, along with expected shortfall of Rs 200 billion in revenue collection is going to make fiscal deficit target of 4.3 per cent totally unrealistic.
The government has projected revenue collection target for the current fiscal year on assumption of 20 per cent growth in revenue collection. This, he said was impossible when the tax base is growing at seven per cent and expressed reservations with respect to achieving the Rs 3.1 trillion FBR revenue collection target referring to it ''as very big number.''
Hafeez Pasha further stated this year the government imposed 12 per cent duty on furnace oil import which is unprecedented as this was never done before, which led to artificial increase in electricity price. On the other hand, he stated the government has imposed super tax in budget for rehabilitation of IDPs which is good step but the problem is that there is simply no room for further taxation.
He added that sales tax on High Sped Diesel (HSD) is 47.5 per cent and stated if the government imposes more than 17 per cent sales tax on LNG, the price of electricity would become very expensive.
The government has not released LNG price and it is expensive as compared to natural gas but it is slightly less than furnace oil price and given today''s low international oil price its price may be around $9 per MMBTU.
He feared the government taxation after every quarter or mini budget would make a mockery of the entire budgetary process and stated the time has come that every taxation proposal must be approved from Parliament. Pasha noted that Pakistan has successfully completed IMF ninth review and tenth tranche would be presented to the IMF Executive Board for approval but there are pre conditions attached to the release of the tranche because of shortfall of Rs 40 billion revenue. He said the government would be unable to achieve Rs 40 billion from taxing luxury items; if the rate is set too high items like perfumes and cosmetics would begin to be smuggled in.
The government has already accepted 25 per cut cent cut in development budget before the start of current fiscal year and provinces combined Annual Development Budget has been reduced from Rs 813 billion to Rs 600 billion and there is no room for a further cut in development budget, Pasha stated. If the cut is more than 25 per cent it would seriously impact on growth and implementation of the government''s funding of CPEC projects, he added.
He said inflation may go to four and half per cent from existing rate in the next few months. He said the foreign exchange reserves have been increased through borrowing and are not sustainable.