Power tariff to go high

By News desk

ISLAMABAD: The National Power Regulatory Authority (Nepra) suggested an increase in power tariff of Rs4 per unit in a summary forwarded to the power division on Wednesday.

The final decision pertaining to the increase rests with the Ministry of Water, Power and Energy and a notification will be issued in this regard. The summary also include arrears to be collected from customers amounting to Rs18 billion.

Meanwhile, the Pakistan Tehreek-e-Insaf (PTI) government decided to impose new taxes to the tune of Rs400 billion in the mini-budget to be presented in the National Assembly on Friday.

It has also been decided to bring down taxable ceiling from Rs12,00,000 to Rs8,00,000 and the import duty on luxury items would also be increased.

The government would slash expenditure and revise all macroeconomic targets for the fiscal year 2018-19 in the mini-budget expected to be presented to the National Assembly tomorrow (Friday).

The approval of the amended Finance Act 2018 is imperative for the government's forthcoming engagements with the International Monetary Fund (IMF).

The Fund would send a team to Islamabad on September 27 for a week of discussions on Pakistan's balance of payments crisis.

From these parleys, Finance Minister Asad Umar and other top officials would gauge the likely conditions of a prospective IMF bailout. Pakistan has previously undertaken 21 IMF programmes, without enacting most of the requisite structural reforms.

Anticipating tough terms, Asad Umar has decided to first initiate remedial measures for Pakistan's record twin current account and budgetary deficits. This would empower Pakistan's position at the exploratory talks with the Fund representatives, before Asad heads to Bali, Indonesia for final negotiations at the annual meeting of the IMF and World Bank on October 8-14.

To reduce the budgetary deficit, the government has already decided to shelve 200-300 unapproved schemes. This would cut development expenditure to Rs600-650 billion in 2018-19, from the current allocation of Rs1,030 billion.

These cuts would facilitate the revision of the projected budgetary deficit to 5.3-5.5 percent of gross domestic product (GDP), from the unrealistic target of 4.9 percent set by the previous Pakistan Muslim League-Nawaz administration in May.

Under the proposed amendments to the 2018-19 budget, the government plans to rescind some of the tax exemptions extended to high earners by the last government. It may also reinstate wealth tax on immovable assets.

The proposals under consideration also envisage the halving of the taxable income ceiling to Rs800,000 a year, and an increase in the maximum rate of income tax to 20-25 percent from the existing 15 percent.

Consumption taxes on cigarettes, cars and so-called luxury items are likely to be increased.

To curtail the current account deficit, the government plans to increase customs and regulatory duties on some 6,000 types of imported goods.

These proposed changes would facilitate the setting of a new revenue collection target. The Federal Board of Revenue (FBR) collected Rs3,842 billion in the financial year which ended on June 30. The existing target for 2018-19 is an implausible Rs4,435 billion.

These proposed changes to the budget would aid the government in changing the overly optimistic macroeconomic targets currently in place.

The GDP growth target would be reduced to 5.5 percent from 6.2 percent, while the projected rate of Consumer Price Index-based inflation would increase from six percent to somewhere between seven and eight percent.