President Pakistan Businessmen and Intellectuals Forum (PBIF), President All Karachi Industrial Alliance (AKIA), Senior Vice Chairman of the Businessmen Panel of FPCCI and former provincial minister, Mian Zahid Hussain on Friday said that the talks between Pakistan and International Monetary Fund (IMF) for the next bailout program are heading towards its final phase. A staff level mission from IMF will be visiting Pakistan this month to finalize the Memorandum of Economic and Financial Policies (MEFP), which will be presented to IMF board and the remaining process for the bailout package will most likely to conclude before the end of the current fiscal year.
The Veteran Business Leader told the business community that IMF’s condition of generation 34% revenue (PKR. 5.4 Trillions) is not looking achievable for the current fiscal year 2018-19 though FBR has proposed government to fix its revenue target in the range of PKR. 5.1 trillion in the upcoming budget against revised estimates of PKR. 4.1 trillion for the ongoing fiscal year. Apart from revenue, curtailing of primary balance within the desired limits will be the biggest challenge for the government to strike the staff level agreement with the IMF for the bailout package. Before the meeting between finance Minister Mr. Asad Umar and IMF’s officials in Washington DC on the next bailout program, in a report: “World Economic Outlook (WEO), Growth Slowdown, Precarious Recovery” IMF had projected a sharp decline in GDP growth rate for Pakistan from 5.2% in 2018 to 2.9% in 2019 and a further decline to 2.8 in 2020. It projected a sharp rise in inflation from 3.9% in 2018 to 7.6pc in 2019. Report further states that in the absence of further adjustment policies in Pakistan, growth is projected to remain subdued at about 2.5%, with continued external and fiscal imbalances weighing on confidence of the economy. Gross general debt to GDP ratio was estimated at 77% during 2018-19, 79.1% in Fiscal year 2019-20, 81% in Fiscal year 2020-21 and 82.6% in Fiscal year 2021-22. It is then further expected to rise up to 85.6 in the fiscal year 2023-24. The IMF had also estimated Pakistan’s primary deficit at 2.1% in Fiscal year 2018-19 and came down to 1.7% during this fiscal year before rising again to 2.2% in Fiscal year 2019-20.
The Former Minister said that although Pakistan’s economic condition looks bleak at the moment but through substantial efforts and wide fiscal reforms by the Government, in a short time the economy can stabilize. Because IMF report has focused primarily on the macroeconomic stabilization in response to financial crises, and less emphasis has been placed on reforms to foster long-term growth and development. The new economic policy should be based on possible down turns and balancing growth and sustainability objectives while also putting more emphasis on reforms to adapt to a fast changing global economy. The reforms will require inclusive and growth friendly budget re-composition to upgrade tax, social spending, and active labour market policies, as well as investment in infrastructure for better public service delivery. Mian Zahid mentions that, it’s inevitable to address multilateral issues, including corporate taxation, climate change, and corruption to achieve sustainable economic growth in Pakistan.
Mian Zahid Urges revolutionary steps for GDP Improvement
President Pakistan Businessmen and Intellectuals Forum (PBIF), President All Karachi Industrial Alliance (AKIA), Senior Vice Chairman of the Businessmen Panel of FPCCI and former provincial minister, Mian Zahid Hussain on Wednesday said that it’s looking impossible to hit GDP growth target of 6.2% during the current fiscal year. According to World Bank’s recent report Pakistan’s GDP growth is projected to slow down to 3.4 percent in fiscal year 2018-19, and expected to drop down further to 2.7 for the fiscal year 2019-2020 but if government introduces some emergency reforms for the economic growth the GDP growth rate can be increased to 4% for the next year.
The Veteran Business Leader told the business community that unstable GDP rates are the reflection of overall macro economic conditions of the country. Since Ayub khan till the present Government Pakistan has been going through instable economic situations. During Ayub Khan’s period GDP average was 7%, in Yahya Khans regime average GDP was 8%, in Z.A Bhutto’s era it was 3%, during Zia-ul-Haq’s administration it was 6%, in Muhammad Khan Junejo’s governance average GDP was 7%, In Benazir Bhutto’s first government it was 5% and remained same during the Nawaz Sharif’s first and Benazir’s second terms. In Nawaz Sharif’s second terms the Average GDP was 3% which remains stable during the Martial Law period of General Pervez Musharraf, till the GDP growth rate of 6% achieved by Muslim League Q’s government which again dropped down to 3% in the last PPP government led by Asif Zardari. But it increased to 5.8% again in the Governance of Nawaz Sharif which was the highest achieved GDP growth for the last 10 years.
The Former Minister said that achieving a long lasting economic stability and growth must be driven by production, investment, industrial growth, easy taxation polices, ease of doing business, cost reduction and stable political environment are mandatory. Some betterment have been shown in the economic situation given to the policies of current government as trade deficit has reduced by 14 percent to $ 23.4 billion, exports inclined by 3 percent, imports declined by 6 percent and remittances rose by 11 percent. However, a mere 3 percent increase in exports despite devaluation of 35 percent in PKR against USD is a question mark. To strengthen exports government is further required to review FTAs and search for new international destinations for Pakistani products.
Trade environment uncertainty should be removed as due to uncertain environment the foreign investment has declined by 23 percent in the ongoing fiscal year and inflation has attained maximum level of 9.4 percent in the last ten years. The stock exchange showed a down turn trend in the April 2019 and KSE-100 index is descended to 36,921 points from 38,423 points which shows the market and trade uncertainty. It is vital to take revolutionary measures to improve GDP in all sectors including education, health, energy, industrialization and infrastructure, he added.
Amnesty Scheme’s success is vital to achieve revenue targets: Mian Zahid
President Pakistan Businessmen and Intellectuals Forum (PBIF), President All Karachi Industrial Alliance (AKIA), Senior Vice Chairman of the Businessmen Panel of FPCCI and former provincial minister, Mian Zahid Hussain on Monday said that there are clear possibilities of increasing tax net and white economy of the country by the PTI government’s proclaimed Tax-Amnesty scheme. Ten times Government of Pakistan has offered such amnesty schemes since 1958, which is the highest number of amnesties offered by any government in the world; however these schemes have never yielded any fruitful results. Previous government collected Rs.121 billion for the treasury and added only about 80,000 people to the tax net as a result of Tax amnesty scheme provided in April 2018
The Veteran Business Leader told the business community that in the past PTI has always antagonised such schemes but now when the national revenue collection is falling short by Rs. 370 billions and also in order to increase the formal economy of the country the proposed tax amnesty scheme is quite welcome. Moreover the amnesty scheme will contribute towards Tax to GDP ratio of Pakistan which is only at 11% right now, whereas China and India is at 17% and 20% respectively. Indeed it will be helpful to the people who wish to pay their taxes but too afraid to declare their assets until now. According to the FBR this scheme will accumulate about Rs. 300-400 billions, however achieving this target will be hard, if not impossible when equated with past results of such amnesties. Now it’s vital for all non tax payers to benefit through this scheme and play their part in the economic development of Pakistan. People who will not declare their assets until July 2019 will be penalized to pay 300% fine and could face imprisonment for up to 5 years. As per Income Tax laws the government has planned a crackdown in July 2019 over the people who wouldn’t declare their assets under this amnesty scheme. This scheme will be the last chance to legitimise their offshore and onshore assets in order to save their selves from imprisonment and heavy fine afterwards.
The Former Minister said that Government will share the scheme with IMF after cabinet’s approval under Presidential ordinance because IMF can oppose the amnesty program like before. FATF clearance is also needed which is currently reviewing Pakistan’s status over money laundering and financing for terrorism. This move coincides with the implementation of the Benami Act in March 2019 in line with its efforts to document the economy. Minister Finance Asad Umar is very hopeful for the success of amnesty scheme and perceives it as a big step towards the broadening of the tax net. 1.8 million People have filed their tax returns until now whereas there is a target set for increasing the tax net with 5 million tax payers. Under the proposed scheme, the government will offer three slabs for declaring all kinds of assets, both offshore and onshore. The proposed slabs were 5pc, 7.5pc and 10pc for whitening of the assets.
Mian Zahid Hussain said that FBR laws doesn’t accommodate small scale businesses due to which most of the small scale businessmen are hesitant to become part of the tax net. There should be a fresh taxation authority to devise laws in accordance with the market’s requirement so that the revenue through taxes for the government could be raised by 100%.