This will be the third downward
revision originally fixed at Rs. 457 billion
From SHAMIM AHMED
April 01 - 07, 2002
Pakistan has signed a letter of intent (LOI) extended
by the International Monetary Fund (IMF) seeking waiver in certain
economic targets set for the current financial year to enable it to
receive $109 million tranche under medium term Poverty Reduction Growth
Facility (PRGF) due by end March 2002.
The LOI will be presented before the IMF Board of
Director for approval. According to the sources in the IMF resident
mission the request would be approved and Pakistan is almost sure to
receive the due instalment during first week of April.
Pakistan has sought waiver in revenue collection
target as the CBR has failed to achieve the already agreed target of Rs.
429.9 billion. Now the target is being reduced to Rs. 414 billion for
the current fiscal year. This will be the third downward revision in
revenue collection target which was originally fixed at Rs. 457 billion.
Pakistan decided to increase fiscal deficit target in
current fiscal year from 5.3 per cent to 5.7 per cent-and Islamabad also
sought waiver in achieving this target from the IMF's Board also sought
waiver in achieving this target form the IMF's Board of Directors. The
government has taken decision to go ahead with upward revision in fiscal
deficit target mainly due to hike in its defence spendings this year as
Pakistan had to mobilise its entire army to plug the infiltration of Al-Qaeda
fighters into Pakistan. On its eastern border as well, Pakistan had to
deploy its forces following tension with India.
The IMF has taken into consideration Pakistan's
problem keeping in view the prevailing stand-off along with eastern
borders and the Fund's Board will provide waiver in fiscal deficit
target," the official was of the view. The upward revision in
fiscal deficit target means that now Pakistan and the IMF are willing
for fiscal deficit to be around Rs 212 billion from earlier target of Rs.
187 billion set for ongoing fiscal year.
"The IMF has appreciated government's efforts to
increase foreign exchange reserves that would touch US$ six billion by
end of current fiscal year," the official said. The IMF has already
indicated that it would only allow Pakistan to increase fiscal deficit
target up to level of 6 per cent if Islamabad decided to spend more
money only on social sector.
True to their tradition the CBR has come out with an
explanation for the revenue shortfall of over Rs. 40 billion because of
decline in imports from Sept. 11 event depriving them of import duties.
Even during the last financial year when there was no Sept. 11 the
revenue target was originally fixed at Rs. 450 billion then revised to
Rs. 417 billion against the actual collection of about Rs 400 billion.
The CBR officials assured the Chief Executive, in a meeting called by
him to know the causes of shortfall, that the revenue collection will
increase to Rs. 550 billion as a result impact of tax survey and
documentation of economy during which CBR has dedected massive tax
The authorities sounded so confident that they made
CE to believe that revenue generation could be increased to Rs. 550
billion for the year 2001-2002 when the tax survey exercise would be
completed throughout the country. According to the CBR the initial
survey of the first 13 big cities which was completed by end 2000 had
revealed massive tax evasion and the optimism that revenue generation
could be increased to Rs. 600 billion during the next 2 years (during
which period all tax evaders will be brought into tax net) was fully
justified. A senior member of CBR said, we never thought tax evasion was
of that high level. Now there should be no problem in adding Rs. 100
billion to the national revenues during the current financial
Sounding more them confident the Finance Minister
also said that we will no only achieve but exceed the target fixed.
Expressing confidence that country is headed in the right direction Aziz
said that "the entire government machinery will be dedicated to
meeting the target set in the budget. He said that "the way to look
at the targets is not to look at the year to year increase only but to
see the tax collection percentage of GDP. In the developed countries its
30 to 40 per cent of GDP, we only have 13 per cent. The developing
countries average ranges between 18, 20 or 22 per cent of GDP".
The former Chairman CBR in an interview to this
correspondent in Aug 2001 said that Scrutiny of the forms already
received by the tax authorities reveal that more than half of the
taxable income earning population of posh localities of 13 major cities
have never filed a tax return, "We never thought tax evasion was of
that high level. In such a situation there should be no problem in
adding Rs. 100 billion to the national revenues during the current
financial year, he confidently said.
President Musharraf has been frequently calling the
meetings of officials of CBR and Ministry of Finance to check the
position of revenue collection month wise. This had a positive impact on
all concerned. But after Sept. 11 events followed by serious
developments in the region could not keep this schedule. It is, however,
high time that he spares some time to call a meeting and take all those
to task who had been painting a rosy picture before him. Decline in the
volume of imports alone cannot possibly cause such a high dent in the
revenue generation. What is worth finding is the fact as to what
happened to massive tax evasion CBR had detected and the positive
impact" of tax survey and documentation of economy exercises.