Mini-budget being thought

ISLAMABAD: A mini-budget is under consideration at the top level as the economic ministries are contemplating upon different options to raise additional Customs Duty by 1 percent on all imported items or jack up Regulatory Duty (RD) on 1,550 items in a bid to discourage rising import bill, The News has learnt.

“Different options are under consideration to jack up additional Customs duty by 1 percent on all tariff lines of 7,200 or jack up Regulatory Duty on over 1,550 luxury items,” top official sources confirmed to The News here on Friday. The country is facing financial constraints as trade deficit has widened up to over $5 billion. In 2016-17 fiscal, the current account deficit stood at $26.68 billion which rose to $31.1 billion in 2017-18 and in the first half of the current fiscal the current account deficit has reached the record level of $18 billion while in June, the country faced $2 billion deficit.

The Ministry of Commerce and Federal Board of Revenue (FBR) held different meetings on this subject but argued that it was brainchild of Ministry of Finance in a bid to curb increasing imports in the current fiscal year. In case of approval for raising additional customs duty by 1 percent, the exemption will remain available to some items such as medicines or other raw materials. It will have significant revenue impact if the government decides to jack up additional customs duty by 1 percent from 3 to 4 percent in one go as it may affect the manufacturing sector negatively by raising the cost of input as the prices of raw material can go up.

When top officials of Ministry of Commerce were contacted for comments, they said that different proposals were under consideration but it was not their brainchild. “We have proposed a list of items to the FBR on the desire of Ministry of Finance,” said another official.

When the FBR high-ups were asked about this development, they said that this proposal might not get through during the remaining period of caretaker setup as this issue did not come under discussion during the last cabinet meeting. Before scheduled election to be held on July 25, 2018, there is possibility of cabinet meeting but the caretaker could take decision to this effect before installation of incoming government after winning the elections.

One top official of Finance Division was of the view that in last two months different steps were taken on economic front with the aim to discourage imports and give impetus to exports such as raising discount rates by the central bank in last three monetary policies, allowing upward adjustments in exchange rate as the rupee stood at Rs130 against US dollar, cash margin requirements on imports and now the State Bank of Pakistan (SBP) was considering to differentiate between commercial importers and industrial importers with the intention to raise cash margin for commercial importers while granting exemption to industrial importers. In the aftermath of taken measures on monetary tightening, exchange rate and administrative steps, now it was considered stance of Finance Division that fiscal measures should be taken as follow-up step to further discourage imports. The current account deficit (CAD) of the country rose sharply and touched highest level of $18 billion in the last fiscal year ended on June 30, 2018 with the import bill of $60 billion. The Finance Ministry high ups argued that combination of monetary, fiscal and administrative steps were required to slash the current account deficit by $5 to $6 by reducing imports and increasing exports and remaining $12 billion deficit on external accounts could be managed after seeking fresh bailout package from the IMF. This scribe contacted spokesman for Prime Minister Office on Friday evening, he said that there was one issue related to granting exemption to Fata came under consideration in last cabinet meeting which was approved. No other issue was on the agenda of the last cabinet meeting, he added.