Pakistan has to restrict budget deficit at 5.1% of GDP, depreciate Pak rupee: Sources
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IMF linked bailout package with rupee depreciation, discount rate hike and other tough condition
ISLAMABAD: The International Monetary Fund (IMF) has demanded the Pakistani government to enhance the discount rate up to double digit, further depreciate the Pak rupee, and increase the tax rates, if it needs bailout package from it.
Linking its bailout package for the struggling economy of Pakistan, it said that the government should take measures for curtailment of budget deficit and the current account deficit with viable plans.
The IMF said the Pakistani government must restrict the budget deficit at 5.1 per cent of the GDP as there is no room to cut the expenditure side. The government has to enhance the additional revenue measures. “Different options have been discussed to increase non-tax revenue in order to provide fiscal space to the federal government,” sources said.
The Pakistani side informed the IMF that the government would launch Sukuk and Eurobond to build up foreign currency reserves and reduce the current account deficit. A Pakistani diaspora bond will also be launched to attract investment from overseas Pakistanis. The trade deficit will be reduced and impact to this effect is already appearing on the trade front.
Meanwhile, Finance Minister Asad Umar chaired a meeting on Economic Advisory Council’s (EAC) Sub-Groups on National Financial Inclusion Strategy (NFIS) and Fiscal Sector here at the Ministry of Finance. The meeting was attended by all major stakeholders/members of the sub-group from the Ministry of Finance, State Bank of Pakistan (SBP), Federal Board of Revenue (FBR) and Securities and Exchange Commission of Pakistan (SECP).
The SBP Governor Tariq Bajwa presented the National Financial Inclusion Strategy to improve quality and increase access to financial services in Pakistan. He outlined targets and necessity policy actions to be taken at various levels in the coming years to achieve the targets. Discussion revolved around fast-tracking the digitisation of financial services to reach out to larger number of consumers, small and medium business and newly emerging entrepreneurs throughout the country.
The finance minister appreciated the Financial Inclusion Strategy and emphasised on diligently time-lining the goals, targets and actions to be taken, and cautioned against delaying the implementation process of the strategy.
In the fiscal policy sub-group meeting, the FBR representatives made a presentation on the problems currently the ailing tax administration system in Pakistan, and ad-hocism of tax policy; it was noted that these issues consequently lead to low tax collection contributing to massive fiscal imbalances.
The sub-groups also considered solutions to fix the crippling tax system of Pakistan by recommending policy measures targeting two major areas, tax administration and tax policy. It was noted that information technology held greater promise in getting more and more people into the tax net, and spotting tax-avoiders.
Also, the coherent and continuous coordination among provinces and between federal government and provincial governments is of paramount importance in avoiding incidence of double-taxation. Asad Umar appreciated the work done by the groups which was assisted by the Senior FBR officers and directed for setting timelines to various administrative and policy reforms suggested so the huge fiscal burden facing our economy is reduced to minimal possible level and the government gets much needed fiscal space. The FBR chairman informed the minister that to uphold the spirit of transparency and easing the relations between the tax payers and FBR, the Board is starting an awareness campaign to let the people know how their tax money is being utilised.
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