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Friday December 09, 2022

IMF not happy with income tax move: Miftah Ismail

Miftah admitted that there was no other choice but to take more tough decisions, adding further changes would be made in budgetary allocations after 15 days

June 12, 2022
Finance Minister Miftah Ismail addressing a press conference in Islamabad on June 11, 2022. Photo: PID
Finance Minister Miftah Ismail addressing a press conference in Islamabad on June 11, 2022. Photo: PID

ISLAMABAD: Finance Minister Miftah Ismail Saturday disclosed that the International Monetary Fund (IMF) was not happy with the budget, mainly because the government did not implement Personal Income Tax (PIT) measures suggested by it.

Addressing the post-budget news conference here at P-Block Auditorium, he said there was no development on the IMF front at the moment.

He admitted that there was no other choice but to take more tough decisions. He said further changes would be made in budgetary allocations after 15 days.

The government did not jack up the tax rate on monthly income salary earnings of Rs100,000 per month, but took measures to slap increased taxes on property and wealthy people. The government also introduced a fixed tax scheme for retailers by offering them to pay Rs3000 to 10,000 per month and the FBR would bring 2.5 million [2,500,000] retailers into the tax net.

The cash-bleeding power sector, the minister said, would result in drowning the country as the government provided Rs1,600 billion subsidies — Rs1,100 billion as direct subsidy by providing Rs11 per unit of cheap electricity to consumers and another Rs500 billion mainly because of leakages resulting in accumulation of circular debt.

“Pakistan cannot afford this kind of maladministration and mismanagement in the power sector, which is more than the country’s total defence budget,” Minister Miftah said. He said running the country would become difficult if administrative matters were not set right.

To his critics, the minister said he was not taking home the money generating through increase in petrol and diesel prices. He said averting a Sri Lanka-like default was the first target of the coalition government.

He said that the fiscal consolidation was the main objective of the government. He said the trickle-down approach failed in Pakistan so they changed the approach to incentivise the poor and less privileged, and jacked up the growth trajectory.

He also highlighted that the circular debt of the gas sector had also ballooned to Rs1,400 billion due to unaccounted for gas (UFG).

Accompanied by Minister of State for Finance Ayesha Ghaus Pasha, Secretary Finance Hamid Yaqoob and Chairman FBR Asim Ahmed, Miftah Ismail painted a very grim fiscal position of the country, and stated that total net revenues of the federal government had turned into negative after transfer of financial share to the provinces under the NFC Award and fulfilling the debt servicing obligations.

“We started from negative Rs600 billion and then the country’s defence, subsidies, running of the civil government, including salaries and pension related obligations, were met through loans. He also stated that there were certain obligations of State-Owned Enterprises (SOEs) which were not fully taken on books.

He questioned that when India could pile up its foreign currency reserves of $600 billion and even Bangladesh surpassed us, how could Pakistan move forward without taking tough decisions and for how long the country would keep begging from multilateral creditors and bilateral friends?

The minister said that Indonesia has imposed ban on export of palm oil, adding Prime Minister Shehbaz Sharif has talked to the Indonesian president. The prices of palm oil in the international market touched $1,600 to $1,700 and now the government earmarked Rs20 billion oil seeds development. Through increased area, Pakistan could save $750 million to $1 billion precious foreign exchange earnings by producing local palm oil.

He said that the tightening of fiscal policies would cause pain, and bitter pill would have to be swallowed by the rich classes for paying increased share in taxes. He said that the zero loadshedding was not possible in June because 21,000-MW was the maximum power plants could generate, while one furnace oil-based Jamshoro plant was producing one unit at cost of Rs59.

To a query about allocation of Rs70 billion for SDGs programme, executed through parliamentarians, the minister said that the programme also obtained funding in outgoing fiscal year and small schemes helped in increasing the GDP.

He said the Pakistan Tehreek-e-Insaf (PTI) government provided subsidy on fuel and electricity in violation of the IMF agreement, while the government had to take tough measures. “This year’s budget is also reflection of government’s intention that we want to avert situation like Sri Lanka. This nation will never forgive those who preferred political gains at the cost of national economy,” he added.

He said that former PM Imran Khan in the the last year of his government took more than double of the public debt accumulated during Nawaz Sharif’s governments in 10-year rule. Former PM Imran Khan took 80 per cent of loans that all rulers took in the country’s 75-year history, he added.

Miftah said the government was committed to continuing the privatisation process, and two big companies would be privatised immediately while others would later on.

Minister of State for Finance Ayesha Ghaus Pasha said the philosophy behind the budget was that minimum impact should be transferred to masses. She said the budget was anti-inflationary as they slapped direct taxes on the affluent classes. She said the government could not change global commodity cycles which was witnessing unprecedented hike in global prices. “Our hands and feet are tied in such difficult situation,” she said and added that the government provided relief through targeted subsidies. She said all daily-use items including atta, ghee, sugar would remain available at Utility Stores Corporation (USC) outlets throughout the year.

APP adds: Finance Minister Miftah Ismail gave an open offer to all litigant businesspersons to withdraw their cases as the government was ready for the out-of-court settlement under its ease-of-doing-business measure. “It is my offer to all businesspersons of Pakistan and institutions that the government is ready to withdraw all cases pending with the FBR (Federal Board of Revenue) and courts if they too are ready for it. Let us sit together in the ADRC and resolve them within two or three months,” the minister said while responding to a question during the post-budget news conference.

Meanwhile, Miftah told a British news agency in an interview said Pakistan will seek a deferred payment plan for liquefied natural gas (LNG) bought under long term deals with Qatar.

“We’ve talked about a deferred payment plan ... or at least I’ve requested this ... and (Pakistan’s) petroleum minister is doing negotiations and is going to do the talks,” he said.

As it awaits IMF funds, cash-strapped Pakistan is faced with falling foreign exchange reserves, enough for less than 45 days of imports, and a huge current account deficit - with energy purchases dominating its record import bill.

Petroleum Minister Musadik Malik, who was in Doha this week for talks with Qatari Minister of State for Energy Affairs and Qatar Energy chief executive Saad al-Kaabi, confirmed talks but said his government was exploring different “innovative” pricing and supply strategies in broad-based talks.

“Deferred payment obviously would be enormously beneficial for Pakistan in the way of cash flows, but that is not the only discussion that we are having,” Malik said in an audio message, describing the discussions as “preliminary”.

Qatar’s government did not immediately respond to a request for comment.

Miftah said his government was also speaking to Qatar about a new five- or 10-year LNG supply deal for three monthly cargos, as well as an additional cargo under an existing deal.

Pakistan already has two long-term supply deals with Qatar - the first signed in 2016 for five cargoes a month, and the second in 2021, under which Pakistan currently gets three monthly shipments. Miftah said two other long-term suppliers had been unable to fulfil contractual supply obligations to Pakistan.

Comments

    Anonymous commented 6 months ago

    This budget is going to break the back of middle class which is giving and paying every penny either for price hike or for taxes. Nothing good for salaried persons who never evade their tax from salary nor can they do, while normal Individuals can do alot for themselves.

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    ANK commented 6 months ago

    Another lesson for the Imposed Culprits and their handlers.

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