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Thursday March 28, 2024

Economy improved, confidence of investors restored

Abdul Hafeez Shaikh claimed that the country's economy stabilised with contraction of trade deficit by 35 percent as well as decrease in budget deficit by 36 percent in first quarter (July-Sept) of the current fiscal year.

By Mehtab Haider
October 13, 2019

ISLAMABAD: The government says the condition of the country’s economy has improved as trade and budget deficits have been overcome and confidence of investors has been restored.

Owing to the expected revenue shortfall of the Federal Board of Revenue (FBR), the government has opted for new strategy by increasing its reliance on non-tax revenue collection to compensate for its fiscal imbalance and keeping the IMF programme afloat. The Adviser to PM on Finance Dr Abdul Hafeez Shaikh on Saturday briefed the media on part of its new strategy by stating that the target of non-tax revenue collection would be jacked up by Rs400 billion, up to Rs1,600 billion against initially envisaged target of Rs1,200 billion on eve of budget 2019-20. He spelt out all positive numbers on economic front and argued that positive outcomes have started appearing on the economic scene.

Abdul Hafeez Shaikh claimed that the economy was on the brink of collapse when the PTI took over the power, but now it got stabilised with contraction of trade deficit by 35 percent as well as decrease in budget deficit by 36 percent in first quarter (July-Sept) of the current fiscal year. He said trade deficit reduced by $5.7 billion in first three months. The budget deficit, he said, was curtailed at much lower side as the government took no borrowing from the State Bank of Pakistan (SBP) and did not approve any supplementary grants. He said revenue collection has witnessed about 16 percent growth. “We have implemented 20 out of 27 action plans of the Financial Action Task Force (FATF),” the adviser said while addressing a news conference here at PID Centre.

Dr Shaikh said the national debt swelled to Rs30,000 billion and it was facing the historic current account deficit with unstable exchange rates. He said the local exports were decreasing, while the imports were increasing and local foreign exchange reserves were swiftly depleting and it was under immanence pressure.In such a time, he said, the government had introduced the economic reforms agenda and under its reforms measures, the defence expenditures were freezed, expenses of the civil government cut down by Rs40 billion and expenditures of the Prime Minister Office slashed down. Besides, he said the government entered into agreements with friendly countries and raised its foreign exchange reserves up to $7 billion. He said about 800,000 new taxpayers have been brought under the tax compliance net.

Accompanied by Secretary Finance Naveed Kamran Baloch, Special Secretary Finance Omar Hameed and FBR Chairman Shabbar Zaidi, Dr Shaikh said economy stabilised due to which the POL prices did not increase in last three months. He said the government did not borrow from the central bank in order to keep inflation low. He said the exchange rate and stock market have also stabilised. He said the wrong exchange rate policy to keep it artificially high in the past resulted into loss of billions of dollars. Dr Shaikh said the FATF conditions were in the best interest of Pakistan as one year ago there was no implementation on five points, but now all institutions were united and implemented 20 points out of total 27. He said measures have been taken to make full compliance of all the points of FATF and the country is determined to come out from the grey list as soon as possible.

The Secretary Finance, Naveed Kamran Baloch, confirmed to The News after the press briefing that the primary balance is in surplus in the range of over Rs200 billion instead of deficit for the first quarter of the current fiscal year. “The budget deficit stands at Rs476 billion in first quarter (July-Sept) period of the current fiscal against Rs738 billion in the same period of the last financial year,” Dr Shaikh said. When asked about the break-up of increased reliance on non-tax revenue target, he said the revenue collection on this front fetched Rs406 billion and witnessed a surge of 140 percent in first quarter of the current fiscal compared to the same period of the last financial year. He said the telecom sector is projected to provide additional Rs338 billion, SBP profit additional Rs200 billion, sale of two RLNG plants Rs300 billion, dividend, interest payment Rs120 billion and Petroleum Development Levy Rs250 billion.

Shabbar Zaidi said there is no deadlock with traders and claimed that the FBR is very close to evolving agreement on fixed scheme on the basis of turnover after which the CNIC controversy would be settled amicably. On Iqama related matters with the UAE, he said Iqama could not be used as tool of residency as it was visa, and it could not be used for avoiding taxes. He said the OECD also supports Pakistan's stance that Iqama should not be used as permanent residence.

Shabbar Zaidi said the FBR did not seek any change in Iqama laws of the UAE, but they were just asking for explanation from the UAE authorities. He said the next round of talks in this regard was expected soon in Islamabad.

He said all the institutions are unanimous for stopping money laundering. Dr Shaikh said the overseas employment sent out 333,000 Pakistanis abroad in Jan-August period of 2019 against 224,000 in the same period of the last year and now it was hoped that the foreign exchange earning in shape of remittances would be increased.