Finance Minister Asad Umar Thursday said the economic reforms package announced by the government is the beginning of the implementation of a comprehensive strategy to put the country’s economy on the path of sustainable growth by promoting domestic supplies.
“The country could not sustain economic growth in the past due to external deficit. Because, as soon as domestic consumption increases, the current account deficit jumps high, so the reform package has focus on increasing domestic supplies and letting the economy stand on its own feet,” the minister said while briefing senior journalists and anchorpersons on the economic reforms package.
The minister said the government was facing serious economic challenge when it assumed the power. “However, we initiated a phase-wise strategy to overcome these challenges. Initially, the government was faced with challenges of economic survival due to rising current account deficit, so it had to take difficult decisions, which although did not directly benefited people, but were necessary for survival, otherwise the country would have faced losses,” he said.
“However, only survival was not the purpose. The objective was to lead the country towards economic progress and development, so the second phase of government initiatives was aimed at developing a comprehensive framework with the consultations of economic experts on how to lead economy towards sustainable development on long-term growth,” the minister said. “The third phase is the implementation stage, and the reforms package is the beginning of this process. This is just beginning … the beginning of economic revival,” he maintained.
During the press conference, the minister enumerated three main problems Pakistan was facing on the economic front which have resulted in an unsustainable economic growth over a long period of time. He identified budget deficit as one of the major causes of economic problems, saying the expenditures of the government are exceeding the revenue collection. “Similarly another major challenge is the increasing trade deficit as the country is exporting less compared to imports. And the third issue the country is facing is investment-to-GDP ratio which is as low as 15-16% and needs to be enhanced to 25-30%,” he said, adding that only investments will not help overcome economic problems.
The minister was of the view that Pakistan was lagging behind in economic growth and that there were just a few counties which were now behind Pakistan in growth. He said the new journey of economic growth and development has started with the announcement of reforms package.
The minister said though there was a shortfall in revenue collection during the first five months of the current fiscal year owing to reduction in prices of petroleum products and reduction in cell phone card tax, however it would be overcome through lifting of ban on non-filers for purchasing cars upto 1300cc. He said if amendment in Gas Infrastructure Development Cess (GIDC) bill is approved and implemented, it will also help boost revenue collection.
However, the minister said government was more focused on bringing about structural reforms in the Federal Board of Revenue (FBR) instead of only focusing on enhancing tax collections. “If we go after only revenue collections, it may be beneficial on short-term basis, but structural reforms will have long-term benefits,” he added.
The finance minister said the tax return filing has increased by almost 34% from 1.1 million to 1.45 million. He said the government was focusing on utilizing modern technology for tax collections instead of stifling the taxpayers.
To a question whether the government plans to go to the International Monetary Fund (IMF), the minister said that the government would do only what is good for the economy of the country. “Good or difficult, the government will take decisions that benefit economy,” he said, adding that the government was engaged in ‘usual negotiations’ with the IMF.
The minister said the government would initiate a scheme for small traders, initially in Islamabad, to facilitate them to pay fixed taxes. He said that two to three categories would be developed in the capital city on the basis of income to fix taxes. He said that if successful, this would be replicated across country. He was of the view that there was a need to incentivize the private sector to create job opportunities and promote economic growth.
To a question, the minister said that the own money given on the purchase of new vehicles was totally unacceptable.
To another question, the minister said the fiscal deficit has been targeted at 5.6% whereas revenue collections at Rs 4,395 billion. He said the government would soon release five-year framework aimed at reducing debt-to-GDP ratio and dependence on external debt. He said the debt-to-GDP ratio had jumped to 72% during the tenure of the last government. He said tax on profit of investment instead of actual investment would help promote businesses.
With respect to Pakistan Steel Mills (PSM), the minister said different options were under consideration. He said the production capacity of PSM will go to 3 million tons which will reduce dependence on imports. He said the mills would use local iron and coal which would help reduce the import bill.
Published in Daily Times, January 25th 2019.
