The economy is likely to fully
respond to the targets set for the current year
By AMANULLAH BASHAR
July 08 - 14, 2002
Against the revenue target of Rs457 billion set for
the fiscal year 2001-2002, The Central Board of Revenue (CB) has finally
reached the mark of Rs401 billion, which is being stated as the breaking
of the psychological barrier of the CBR based revenue collections.
The total amount of revenue has a shortfall of 56
billion yet it better than the previous year by Rs8 billion despite
difficult conditions faced by the economy.
The target set for the current fiscal year i.e.
2002-2003 is Rs460 billion, which is most likely to be achieved in view
of the new tax system introduced in the current budget, revenue experts
It may however be mentioned that the actual amount
collected by the government is much higher than the CBR collection of Rs
401, if the non-CBR collection amount is also included in the total
amount of the revenues.
The gas and petroleum sector alone gave Rs53 billion
under development surcharge collection by the government, the amount of
government collections may further jump if the surcharges and additional
surcharge collected on the electricity consumption is also taken into
Meanwhile, the International Monetary Fund has said
that it was still concerned about lower-than-expected tax revenue in
Pakistan despite approving a $114 million loan tranche.
According to reports, Henri Ghesquiere, Senior
resident representative of the IMF in Pakistan, said the Fund's
executive directors had understood the "exogenous factors"
that led to a shortfall in revenues but had urged Islamabad to improve
tax collection and administration.
"They unanimously stressed the importance for
the CBR to implement its ambitious reform programme fully so as to
ensure Pakistan does receive the revenues to step its expenditures for
health and education and for alleviating Poverty.
The IMF Executive Board approved the $114 million
tranche as part of a 1.37 billion-dollar three-year loan programme to
reduce poverty and boost economic growth in Pakistan.
The Fund waived the quarterly revenue target for the
period that ended March 31, saying the shortfall in revenue reflected
continued lower-than-expected imports since the September 11 attacks on
the United States.
"They realize there are exogenous factors such
as a shortfall in imports that has played a big role".
Pakistan, a key ally in the US-led war on terror in
neighbouring Afghanistan, says its economy suffered a body blow in the
wake of the September 11 events, with export orders cancelled and
insurance premiums shooting up.
The trends forced the government to revise the
revenue targets for fiscal 2001-2002 down to 414 billion rupees from 457
The Central Board of Revenue, which is the main
tax-collecting agency, however was of the view that it collected 400
billion rupees in tax revenues by the end of the fiscal year on June 30.
"We have been told, the government would be more
than satisfied if achieved Rs. 401 billion mark.
The tax collection, it may be recalled fell by 3 per
cent in the first eight months of the fiscal but it improved by March
with an upward trend in imports.
40 per cent of revenue is directly or indirectly
dependent on imports. Since they started picking up, therefore, the
situation is getting improved.
The revenue target for fiscal 2002-2003 had been set
at 460 billion rupees.
The Central Board of Revenue (CBR) has finally
crossed the psychological revenue collection barrier of Rs400 billion.
Till May 31, 2002, the CBR had collected Rs345
billion and in the next month of June it added an amount of 56 billion
which brought the total for the fiscal 2002 to Rs401 billion.
The Rs56 billion collected in June comprises Rs21
billion sales tax, Rs20 billion income tax, customs duty of Rs9.5
billion and Central Excise duty of Rs6 billion.
The 2002 year's revenue collection of Rs401 billion
is Rs8 billion higher than the total collection of Rs393 billion during
previous fiscal year.
Tax experts, while analyzing the situation, said that
the most surprising feature of the economic numbers was the resilience
displayed by the manufacturing sector under volatile conditions. The
factors working against this sector in the financial year 2002 included
export disruption due to the Afghan conflict (higher freight charges,
physical disruption and cancellation of export orders due to perceived
uncertainty regarding ability to deliver), a global economic downturn
exacerbated by Sept 11 and then war fears with neighbouring India. Large
scale manufacturing during the first nine months of the year grew by 3.2
per cent while the government of Pakistan estimates that it will grow by
4.4 per cent for the full fiscal year.
The experts are of the view that the manufacturing
sector will grow by 7.6 per cent in the financial year 2003 emulating
its performance in financial year 2001. Key drivers in this assessment
are continued volume growth in the textile coupled with better unit
prices as the global economy stages a recovery.
Keeping in view the better performance of the textile
sector and improved conditions on the import side, the economy is likely
to respond to the targets set by the CBR for the current financial year,
the experts feel.