Pakistan Business Council seeks more reforms in next IMF programme

By Our Correspondent
September 24, 2023

KARACHI: The Pakistan Business Council (PBC), a business advocacy group, met with finance minister Dr. Shamshad Akhter to discuss the economic situation and the measures taken by the interim government to stabilise the economy.

The meeting, which lasted for two and a half hours, discussed various issues related to economy, taxation, power, exports and foreign investment.

"The Pakistan Business Council was reassured that the measures taken by the interim government will stabilize the economy," the PBC said in a statement.

The PBC appreciated the determined action to stem smuggling, success in closing the gap between the inter-bank and open market exchange rates and government’s courage on energy and fuel pricing to sustain the IMF Stand-By Agreement (SBA).

However, it urged the finance minister to ensure that the next IMF program is more reform-oriented and addresses the fundamental flaws in the energy sector and the tax system.

The council welcomed the steps taken by the minister to strengthen governance and accountability in state owned enterprises.

The meeting was also attended by Malik Amjed Zubair Tiwana, chairman FBR and his team with whom the PBC shared its concerns at the disproportionate burden of taxes on the formal sector, disparity in tax rates between corporate and unincorporated businesses, levy of minimum tax on turnover during tax holiday period and on listed companies, high tax on salaried employees and U-turns on taxation of inter-corporate dividends.

The finance minister assured that a focused discussion on these issues will be organized with the FBR.

Minister Akhtar also shared plans to establish a Tax Policy Unit, independent of the FBR and to seek input from the Fiscal Affairs Department of the IMF on issues highlighted by the PBC.

PBC urged the minister in her position as the chair of the Cabinet Committee on Economic Revival to support competitive pricing of power for industry to create more jobs, promote exports, reduce reliance on imports, increase tax revenue and absorb surplus generation capacity, especially in the winter months.

"To accomplish this, it advised expediting the south to north transmission projects to dispatch low-cost power, restructure IPP debtin tenor and in the case of CPEC projects, also to convert to G-to-G terms, reduce T&D and recovery losses of DISCOs and to convert the three imported coal projects to cheaper local Thar coal," the statement said.

The finance minister assured that the government’s objective was to reduce tariffs.

On exports, the PBC recommended a “whole-of-government” approach to overcome fragmentation between ministries.

"It urged operationalising the EXIM Bank, changes to allow adequate investment in brand building and in acquisition of IT companies abroad, finding ways to wash export pricing clean of all taxes incurred in an extended supply chain, reconfigure export incentives to target items with growing global demand and ensure that PSQCA and DRAP were fully functional for their certification roles."

The finance minister agreed that the best ambassadors of a country are existing investors and foreign investors derive confidence from local investors.

PBC urged focus of FDI on projects that lead to exports or reduction in imports, that enhance food security and which bring new technology and know-how.

The PBC reiterated the importance of IMF support and the finance minister assured that the government was fully committed to delivering the conditionalities of the SBA. She welcomed PBC’s suggestions on a reform centric program for the future.