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May 4, 2021

Govt to rework IMF deal: Tarin

Top Story

May 4, 2021

ISLAMABAD: Minister for Finance and Revenue Shaukat Tarin said the IMF agreement imposed very harsh conditions under the $6 billion Extended Fund Facility (EFF) programme.

In his maiden briefing to parliamentarians during the National Assembly Standing Committee on Finance meeting here at the Parliament House on Monday, under the Chairmanship of Faiz Ahmed Kamoka, Shaukat Tarin made it clear that the government would re-negotiate with the IMF its demand for hiking power tariff and raising tax revenues.

Shaukat Tarin said that the era of economic ‘consolidation’ was underway since 2019 resulting into difficulties on economic front. The lack of GDP growth had generated non tax revenue, unemployment, and many other problems on the economic front, he added. At the outset, he said that he believed in the supremacy of the Parliament.

He said he was making an effort to convince the IMF for showing Pakistan a lenient attitude in the wake of the emergence of the third wave of Covid-19 pandemic. “Now we will have to stand up to talk to the IMF as their demands for hiking electricity that has resulted into hiking inflationary pressures and causing corruption. He said reduction of circular debt cannot be achieved through hiking power tariff only and some alternate plan needs to be implemented to solve this problem.

“Instead of raising tax rates, the government will move towards broadening of the tax base,” the minister said. The minister said the government would privatise those state-owned enterprises that could not be run in the public sector. He said that the government would increase allocation for development projects through Public Sector Development Programme (PSDP). He said that the centre would provide equitable growth opportunities for all provinces. Tarin said the phase of consolidation was underway since 2019, but without moving the wheels of the economy, there would be no revenue and no job creation. He said that in the wake of low GDP growth, the government was left with no option but to pay higher capacity payments through enhanced electricity generation.

He said that even if the GDP growth touches 4 to 5 percent next fiscal year, it would not be sufficient to meet our increasing requirements. He said that Pakistan required a shift for moving towards a higher growth trajectory.

Tarin said that they would tell the IMF that the world was giving stimulus packages on account of financial and monetary accounts to spur growth, but the sword of tough conditions was hanging over our heads so they would make efforts to convince IMF to show leniency towards Pakistan.

The minister said that he did not believe in increasing the taxation rate but they would make efforts to bring the non-filers into the tax net. He said that the element of harassment by FBR would be abolished and their discretionary powers would be reduced.

The desired changes would be brought into audit system, he added. Recalling his experience with FBR, he said while conducting scrutiny of his taxes the FBR misplaced his file. “If the former minister is not spared of the FBR gaffes’ then it can be imagined how it behaves with common citizens,“ he said.

He said efforts would be made to jack up tax to GDP ratio by 1 percent in every financial year. “But it cannot be done without improving the growth trajectory as Pakistan requires sustained higher growth over next three decades,” he said.

He said that the government has identified 10 to 12 major sectors and the economic experts were assigned to prepare roadmap for achieving price stability, agriculture, industry, tax revenues, housing, social protection, services sector, debt management and other issues. He said that out of total revenue of provinces, 85 percent was spent on total nine big cities and health and education were the most neglected sector.

Tareen said that there was need to focus on housing sector which right at the moment was just 0.25 percent of our country’s GDP while it possesses significant share in other parts of the world.

Khalid Mustafa adds: Shaukat Tarin with the input from top notches has worked out a strategy not to increase the electricity tariff and will take it up with IMF in his first formal interaction scheduled somewhere in the mid of current month, a senior official at Petroleum Division confided to The News.

“The World Bank has shown softness towards the government’s plan not to increase the electricity tariff with the condition that the government would curtail the circular debt effectively. But, the IMF is so far rigid and not showing flexibility,” he said.

The IMF wants to increase the electricity tariff by Rs4.60 per unit in two and half years’ time, but since the US dollar has depreciated to close to Rs153 from Rs161 the Pak Rupee will be curtailed in the tariff from Rs4.60.

In the remaining Rs3.60 per unit, the government will bring down the tariff by Re0.60 per unit through buying out 11 old power plants based on furnace oil.