Pakistan briefs IMF team on proposed mini-budget

ISLAMABAD: Pakistan’s economic managers on Thursday briefed the IMF team from Washington, DC, on video conference about the proposed mini-budget and partial withdrawal of tax incentives, imposition of regulatory duties on luxury items and slashing down development outlay in the range of Rs330 to Rs430 billion in the next week.

The IMF team was briefed by Pakistani authorities that the government planned to take additional taxation measures of Rs100 to Rs125 billion through proposed changes in the Finance Act 2018 and imposition of additional customs duty as well as slapping increased regulatory duty on import of luxury items.

Some income tax exemptions might be withdrawn but so far no final decision was made on it. The FBR’s tax collection target would also be revised downward from Rs4,435 billion to Rs4,300 billion-4,325 billion for the current fiscal year 2018-19 against the collection of Rs3,842 billion for the last fiscal year 2017-18.

The FBR has convinced the Finance Ministry that the envisaged target of Rs4,435 billion was based on the projection of last year collection at Rs3,935 billion but the actual collection stood at just Rs3,842 billion so the tax machinery argued that without taking additional taxation measures it could collect Rs4,200 billion maximum.

Pakistani team led by Minister for Finance Asad Umar, Minister for State for Revenues Hammad Azhar and others also apprised the IMF team on video conference at 6.30 pm on Thursday at Finance Ministry that the budget would be made on realistic assumption and overall revenue collection targets and expenditures adjustments would be made to bring down the budget deficit at sustainable levels. In last fiscal year ended on June 30, 2018 the budget deficit had peaked to Rs2260 billion equivalent to 6.6 percent of GDP.

The IMF's staff team is scheduled to visit Islamabad from September 27 for holding one week talks but the Pakistani managers decided to brief the IMF through video conference for proposed budgetary measures in advance.

Now the government intends to withdraw partial tax incentives by jacking up taxable ceiling from Rs0.4 million to Rs 1.2 million and reducing the maximum tax rate from 30 to 15 percent introduced during the last PML-N led regime through Finance Act 2018. Now the government plans to withdraw partial incentives through upcoming amendment into Finance Act and the PTI led regime is considering to table the revised money bill before the National Assembly on coming Tuesday.

The government is also considering to jack up additional custom duty from 2 to 3 percent and raising the regulatory duty on luxury imported items such as mobiles, cars, food items, cosmetics, jewelry and other such items.

On expenditure side, the IMF team was apprised of different measures under consideration to slash down the development outlay from Rs1030 billion to Rs600 to Rs700 billion depending upon the availability of resource kitty.

The Planning Commission (PC) has presented three different scenarios by slashing down the development outlay to Rs800 billion, Rs700 billion or Rs 600 billion respectively on the basis of which the availability of resources was going to negatively impact the development projects. It was also decided that all unapproved projects in the PSDP list would be abolished in totality and those projects could be abandoned where spending stood at less than 20 percent. Several projects being executed by Planning Commission would be deleted from the list of PSDP as currently 38 projects were falling into domain of the PC itself so many projects would be stopped. All this exercise needs to be done on professional basis instead of stopping or continuation of projects on the basis of any political grounds.