GDP target could be hit by more than 2pc: Ayesha Ghous Pasha

ISLAMABAD: State Minister for Finance Ayesha Ghous Pasha told the National Assembly’s Standing Committee on Finance and Revenue that due to the recent devastating floods, nine million people have gone below the poverty line. Besides, the country’s economic growth rate may fall short of the target by more than 2 percent.

The economic team also ruled out the possibility of imposing additional taxes saying the country has briefed the International Monetary Fund (IMF) on the likelihood of shortfall in its tax collection due to the flood-hit economy and the IMF is likely to give concessions in loans to Pakistan.

Chairman Federal Board of Revenue (FBR) Asim Ahmed and the State Minister for Finance Ayesha Ghous Pasha briefed the National Assembly’s Standing Committee on Finance and Revenue on economic situation that met on Tuesday.

Asim Ahmed said that although the Fund last month had expressed satisfaction over tax revenues, however, due to political and economic instability in the country, the revenues may come under pressure in the coming months.

FBR has collected Rs2.149 trillion from July to October 2022. The target of sales tax and customs duty could not be met, but the target of income tax has been achieved. With decline in imports, cuts in PSDP (public spending) and high inflation, the tax revenue may be affected.

He also clarified that government does not have the intention to impose new taxes on the demand of IMF. He said that 100,000 new taxpayers have submitted their tax returns this year. The extension of the date for filing tax returns will further increase the number of filers.

The chairman FBR further said that the rate of direct taxes in the total tax revenue is 62 percent. The FBR had collected Rs52 billion in tax in the last financial year on account of income tax returns. The tax-to-GDP rate is currently 9 percent and this has been decreased due to the rebasing of GDP, Asim added.

MNA Barjees Tahir asked whether there is any prospect that the US dollar value against the rupee will decline, as Finance Minister Ishaq Dar had claimed to bring it down to Rs200 per dollar. Besides, he said there are indications of a further increase in electricity tariff and petrol prices by the government on the instructions of IMF.

Chairman Committee Qaiser Ahmad Sheikh questioned what conditions were imposed by the IMF and World Bank and what assurances were given by the finance minister during his US tour.

State Minister for Finance Ayesha Ghous Pasha said the Pakistani delegation held 54 important meetings with IMF, WB and other officials in a recent visit to America.

She said the IMF has been briefed on the revenue as well as flood situation and the Fund will send the report to its board after which the board is likely to give concessions in loans to Pakistan. “We not only informed IMF and WB about the damages caused by the flood but we also asked the world to pay compensation to Pakistan.”

The state minister said that due to the recent devastating floods, nine million people have gone below the poverty line. The country’s economic growth rate may fall short of the target by more than 2 percent, she added.

Ayesha Ghous Pasha said: “We will have a detailed discussion with the IMF at the end of November on this matter,” adding economic targets for the current financial year have also been revised. The FBR revenue is also likely to be affected after the revision of targets whereas imports will further fall down to 20 percent in November due to the floods. She said that according to the estimates of the Ministry of Planning, the flood caused a loss of $30 billion. “We have spent Rs120 billion immediately to give money to flood-affected people while the World Bank, IMF and the international community have expressed their sympathy to Pakistan for losses due to the flood,” said Pasha.

She further said WB will give a $500 million grant while ADB will also give a $1.5 billion loan to Pakistan.

On the other hand, the government has also announced a package for farmers due to the agricultural damage caused by the floods and the UN is also playing its part in paying compensation for climate change damage to Pakistan.

Nafisa Shah of Pakistan Peoples Party alleged the FBR of harassing taxpayers and stated that all the funds of her hometown municipality namely, Khairpur, have been frozen and this was not specific to Khairpur alone. Similar reports are also coming from other municipalities as well. “The FBR has frozen the account of Municipal Committee Khairpur and salaries of MC employees of disaster-affected area are being withheld,” she deplored. The committee directed the FBR to resolve the matter at the earliest.

Following the committee meeting, a senior official of the Finance Ministry said future revenue collection is expected to witness a decrease and expenditure is likely to increase due to a decline in growth and variation in other economic variables caused by the floods.

The official said the negotiations with the IMF are being held on a daily basis through video link and there is no veracity in reports of introducing new taxes on the demand of IMF.

He said that the political situation in the country is also one of the factors for the delay in fielding a staff-level mission by the IMF. However, he acknowledged that the IMF has been pressing for an increase in the tax-to-GDP ratio. He said the ninth review talks with the IMF are likely to continue for five days as the process of sharing economic data is being done on a regular basis. After the devastating floods, the country has requested the Fund for relief or a waiver in the budget deficit ceiling.