Tuesday November 29, 2022

Not possible to come out of IMF Programme: Tarin

June 17, 2021
Not possible to come out of IMF Programme: Tarin

ISLAMABAD: While agreeing to re-write the FBR powers for withdrawal of arresting taxpayers in consultation with senators, Federal Minister for Finance Shaukat Tarin has said that it was not possible to come out of the IMF Programme.

It was the crux of discussions held by Finance Minister Shaukat Tarin before the Senate Standing Committee on Finance, which held its meeting under chairmanship of Senator Talha Mehmood here at the Parliament House on Tuesday.

However, for the time being, both sides, the Pakistani authorities and IMF, agreed to continue talks for narrowing down differences but the IMF sponsored program was put on halt mode as the IMF conveyed that the Sixth Review under Extended Fund Facility (EFF) would be accomplished in September this year instead of July 2021. “Pakistan has forwarded its desire to combine the sixth and seventh reviews jointly under EFF in September 2021,” said the official sources.

Tarin told the committee that the government would rewrite powers of FBR for arresting and prosecuting taxpayers involved in income concealment. He said the government had decided that tax notices would be dispatched through third party.

He said that Pakistan’s economy was facing a difficult situation as the current account deficit (CAD) had peaked to $20 billion and the government accepted tough conditions of the IMF programe.

He said the IMF-provided loan programme was frontloaded under tough conditions as the discount rate was hiked to 13.25 percent, so the debt servicing got doubled. The minister said that he did not agree to the IMF condition of increasing personal income tax to collect an additional Rs150 billion in the next fiscal year. He said that he plainly informed the Fund team that he would not increase burden on those who were already paying their taxes. He said that he would increase taxation his own way.

The financing gap of $20 billion, he said, had left no other option for the government but to go to the IMF and accepted their tough conditions such as hiking discount rate, devaluation of exchange rate and increasing power and gas tariff. "We have gone to the IMF because the country did not have dollars for repayment of past loans," he said and added that $10 billion short term borrowing was obtained by the previous government.

He said that now the strategy was to move towards inclusive, sustainable and long term growth trajectory to create more jobs.

The minister argued before the committee that he was not in a position to commit that the GDP growth would be sustainable or not because it would be known after three to four years whether the country was heading towards sustainable growth or it was another boom-and-bust cycle as experienced in the past. However, he said he could guarantee that the measures taken by the government in the budget would bring about inclusive growth as for the first-time bottom-up approach was adopted.

Tarin identified the power sector as a major challenge of the economy and the government would be dealing with the capacity payment issue as well as improving the distribution companies to privatise them.

Senator Sherry Rehman from the PPP said on the occasion that the mini budget started rolling out following increase in petroleum prices and the IMF programme was being criticized because it was frontloaded that made the life of common people more difficult.

In response to Senator Sherry Rehman's question, the minister reminded her that “you and I had discussion on the IMF programme during cabinet meeting in 2008 and I told you if you had other option, then go and bring the money (dollars) from someone else." He said that the IMF progrmme does not happen with consensus because “you are borrowing and they are the lender”. The minister said that the present government was obtaining loans to repay the past loans. He said that debt to GDP ratio was decreased from 89 percent to 86 percent in one year of the government when all other countries debt to GDP ratio was increased due to Covid.

The minister said that he was making all-out efforts to get relaxation from IMF on tough conditions. Senator Saadia Abbasi from PMLN pointed that the unemployment and rising inflation were making lives of common people difficult, the minister replied that the only way to attack poverty was increase income. “Let us attack on poverty through direct interventions,” he added.

The Chairman of the Senate Panel, Senator Talha Mehmood, said that it was dire need not to look at businessmen with suspicion and it could be done through bringing a paradigm shift.

To another question raised by Senator Faisal Sabzwari from MQM Pakistan, Tarin replied that there were some deficiencies left in the last 7th NFC Award as he now thought that the provinces' share in the federal divisible pool should have been linked with their own revenue generation efforts. He said that the Centre also failed to jack up tax-to-GDP ratio from 10 to 15 percent. He said the agriculture income tax could generate Rs60 to Rs70 billion despite having contribution into GDP in the range of 20 percent per annum. He said that the two provinces had agreed to allow the FBR for making agriculture income tax collection on their behalf.

In response to a question by Senator Faisal Subzwari, he pointed out that the agriculture sector whose share in the GDP is 22 percent was out of the tax net and provincial finance commissions have not been constituted. “The agriculture income tax is a black hole and there is need of progressive thinking to solve this issue” he concluded.