Covid-19 truly dealt a blow to economy: Hafeez

ISLAMABAD: Adviser to the Prime Minister on Finance Hafeez Sheikh has said the government had to take “difficult decisions” to cut its own expenditures for the federal budget 2020-21, which is focused on coping with the impact of Covid-19 — which hurt Pakistan’s GDP to the tune of Rs3 trillion.

“The government has taken difficult decisions of cutting its own expenditures keeping in view the problems faced by the masses,” Sheikh said in his post-budget news conference here on Saturday along with Information Minister Shibli Faraz and Minister for Industries and Production Hammad Azhar.

According to Radio Pakistan, the PM’s aide said the basic pillar of the budget is that no new taxes have been imposed, rather concessions worth 40 to 50 billion rupees have been given in taxes and duties to support the industrial sector and create job opportunities.

He said the development outlay has been set at 650 billion rupees while allocations for the Ehsaas Programme have been enhanced to protect the vulnerable segments of the society.

The adviser clarified that the present government is taking loans to clear the loans taken in the past. “We paid back Rs2,700 billion of loans last year, and this year we will pay back Rs2,900 billion in loans,” he added.

Giving a breakdown of the relief given in taxes, Sheikh said regulatory duty on 1,623 tariff lines of raw materials “are totally being done away with” while on others, including those related to engineering sector, are also being reduced.

The adviser said ten different types of withholding tax are also being abolished. Sheikh said massive relief has also been given to different sectors, especially construction. The capital gains tax is being halved whilst the federal excise duty on cement has been cut.

Sheikh said the sales tax for the retailers opting to link themselves with the FBR is being reduced to 12 per cent. The duty on hospitality sector is being reduced from 1.5 per cent to 0.5 per cent. He said taxes and duties are being abolished on the testing kits of coronavirus and cancer.

The adviser pointed out that the current account deficit was hovering around 20 billion dollars two years ago and “we brought it down to 3 billion dollars”. He said the foreign direct investment witnessed an increase of 137 per cent in the first nine months of the outgoing fiscal year.

The PM’s aide said the government also tried its level best to pass on the benefit of reduced petroleum prices to the people. He also said the IMF, World Bank and Asian Development Bank are appreciative of the financial discipline shown by the present government.

Responding to questions, Sheikh said the present government has been striving to increase per capita income and national savings. “Tax collection and national savings have historically been low in Pakistan, but we are committed to increase their rates. If we increase income of people, this will enable them to save more.”

He said in order to increase per capita income the nation needs to create a balance between overall income and overall population. The adviser said process of privatisation has been expedited in the country and will be further expanded to bring efficiency in the public sector.

On another question, he said an increase of 1,000 billion rupees in target of FBR has been made to enhance national income. “We are also taking steps to increase tax base of the country.”

Sheikh also said it was difficult to predict about the exports in the near future due to prevalent situation of coronavirus pandemic. He said provinces are independent to devise their own tax collection targets based on realistic situation. On a question, he said the budget is for the next financial year, but “amendments can be made in certain areas if need arises”. Dispelling misperception of any dictation from the IMF, the adviser said IMF is an international body and provides loans to countries to help stabilise their economies. “It depends on countries to manage their expenditures according to their resources,” he added.

Minister for Industries Hammad Azhar said the private sector is the “engine of job creation”. “Our focus is on preservation of economy so that it runs smoothly and creates employment opportunities,” he added.