The mission was told that future
trends looked promising to achieve somewhat difficult export target during 2000-2001
From Shamim Ahmed
Feb 19 - 25, 2001
The Central Board of Revenue (CBR), in its meeting with the 5-member
IMF mission currently on a visit to Pakistan to review the economic situation during the
second quarter of the current financial year, conceded a shortfall of Rs. 13 billion
during the first seven months. Plainly admitting that this shortfall cannot be recouped
during the remaining five months of the current fiscal. CBR chairman, however, assured
that there will be no further slippage and the target for the remaining 5 months will be
fully met as the government has made fool-proof methods to avoid any further shortfall.
The IMF review mission, had a detailed meeting with the CBR authorities
on Thursday last. Their first question was as to why this shortfall occurred and we
explained the reasons", an insider confided in PAGE. The officials of the CBR
reportedly told the mission that it was expected that dutiable imports would grow by 12.7
per cent but it grew by only 4 per cent. Dutiable imports directly and indirectly
contributes to 40 per cent tax revenue. This 40 per cent tax collection suffered an 8 per
cent slippage due to this reduction in dutiable imports.
Survey contents were delayed and the third visit was to start in July,
which remained pending till December as traders were allowed extension to declare their
stocks in income tax returns. Final returns of IT were filed in December.
Interest on securities was reduced, which also decreased its
withholding tax to a significant amount. This rate has again been enhanced and now we hope
that on government securities on government courtiers would increase", the source
The review mission later called on the Finance Minister, Mr. Shaukat
Aziz, who, however assured the mission that most of the shortfall occurred in the revenue
generation during the first seven months of the current fiscal would be recouped during
the remaining five months as all possible efforts are being made to achieve an all time
high target of Rs. 430 billion. He was optimistic to close the financial year with revenue
of about 425 billion.
Generally, it was said that the Public Sector Development Programme
(PSDP) will be the first casualty in case the government implemented any contingency plan.
This PSDP, it was feared, could be slashed down from Rs. 120 billion to Rs. 110 billion.
The PSDP was being asked for the last many years to improve the budget deficit.
The mission was also told that exports have registered over 17 per cent
increase in January this year and that future trends looked promising to achieve somewhat
difficult export target during 2000-2001.
Officials of the Finance Ministry explained that the optimism of the
Finance Minister was based on facts and ground realities. According to them, some of the
key-economic indicators although closely missed the target, reflected an admirable growth
this year as against the last year during 2000-2001, the remittances expanded by 17.35 per
cent. The remittances increased by $84.62 million over the last year as Pakistan received
$572.13 million remittances from overseas this year as compared to $487.51 million in the
same period of last year. Ministry of Finance had projected $500 million worth of
remittances during the first half of 2000-2001, but the actual inflow of remittances
amounted to $572.13 million.
Tax revenue collection in seven months, although remained behnind the
target by 13 billion, improved by Rs. 24 billion or 13 per cent over the last year as
total provisional tax receipts amounted Rs. 211 billion this year, against Rs. 187 billion
actual revenue of last year.
Meanwhile, country's exports and imports during July-January this
fiscal posted 9.6 per cent and 10.1 per cent growth respectively in comparison with the
corresponding period of the last fiscal.
Exports although remained 414 million below the target, for seven
months, and settled at 5.222 billion as against the target of 5.636 billion. In terms of
dollars the exports are higher by 456.90 million, if measured with 4765.80 million exports
during the same period last year.
Imports during the period under review totalled 6362.10 million as
against 5778.80 million in the same period of last fiscal. Overall increase in imports had
been placed at 9.3 per cent over the last year.
Trade deficit, however, enlarged beyond the annual target. Last year
the deficit settled at 1013 million during the period under review. The trade deficit has
deteriorated because of drastic increase in the world's POL products and un-projected
import of sugar. The annual size of deficit was put at 1.10 billion dollar for 2000-2001.
According to available data, the major industrial sectors have posted
7.69 per cent growth over the last year. That growth does not include the output of sugar.
This trend of growth in the economic indicators is expected to prevail
further during the remaining period of the current fiscal, the sources said.
Some economic indicators, they said, may miss closely the annual target
during this fiscal, but overall performance of exports, imports, tax revenue, remittances
and industrial production would be much better than last fiscal.
Real GDP growth for this fiscal had been projected at 4.5 per cent
agriculture growth at 2.6 per cent. Current account deficit at 1.6 per cent of the GDP or
Rs. 981 million, reserves at 1.74 billion and remittances at 1.10 billion.
Last year agriculture sector marked improved growth because of bumper
cotton and wheat crop. During this fiscal the water crisis has squeezed the chances of
increase in the growth of this sector.
It may be pointed out here that 11 per cent increase recorded in tax
collections for the first six months of the current financial year reflected a big
shortfall in the actual tax collections as compared with the target set forth in the last
budget, and this situation rather confirm the views of the IMF about the weaknesses of the
country's tax regime. The previous governments had made some attempts to tax reforms, and
several commissions and task forces were set up to recommend meaningful measures for
combating tax evasion and corruption in order to substantially boost the yields. The IMF
report about Pakistan has obviously downgraded all the so-called tax reforms introduced
and put through so far by the previous government.