PIAF suggests 'Dollar Amnesty Scheme' to handle budget deficit 

The Pakistan Industrial and Traders Associations Front (PIAF) on Sunday while appreciating the budget 2022-23 asked the government to also take measures to reduce energy prices besides controlling rupee depreciation by announcing a 'Dollar Amnesty Scheme' to strengthen the local currency.  

PIAF senior vice chairman Nasir Saeed and vice-chairman Javed Siddiqi, in a joint statement, asked the government that instead of opting for borrowing to handle the budget deficit it should announce a dollar amnesty scheme to bridge this huge gap. He said that no measures have been announced to curtail the current account deficit or the imports as the finance minister sets the current account deficit target at only 2.2% of the Gross Domestic Product (GDP). 

The coalition government caved into the IMF’s demand to exhibit a primary budget surplus, pitching it at Rs152 billion by planning fiscal consolidation of nearly Rs1.8 trillion or 2.2% of the GDP in the next fiscal year. 

A major chunk of the new budget –the Rs5.45 trillion or nearly 58% of the budget – will be spent only on two heads – debt servicing and defence. There is an alarming increase of over Rs806 billion or 26% increase in debt servicing costs in just a year. In the outgoing fiscal year, the share of these two components was half of the total budget. The defence services share remained constant but the debt servicing has gone out of control. 

Domestic debt servicing will eat up nearly Rs3.5 trillion while another Rs511 billion will be given for foreign debt servicing. The average interest rate in the next fiscal year is estimated at 14%, which would take away what the government will earn in additional revenues. 

Nasir Hameed said that other ways to reduce the budget deficit are promoting industrial growth by announcing relief in the cost of production. He said that high economic growth is the best way to reduce the budget deficit because it would also enhance the government revenues. 

Javed Siddiqi said that Pakistan needed millions of jobs annually but the government had not taken any concrete step in the federal budget for job creation for the unemployed youth. Although details are still to come out, the budget vibes seem positive, he said. 

He commended the government for removing the duty on solar panel import by agreeing to the demand of the industry. He praised the government for introducing an alternate dispute resolution mechanism which, he said, was a longstanding demand of the industry. He said the corporate tax had been increased and the feasibility of the sector was already out, as its raw material had doubled in prices. Fuel, diesel, and gas prices have increased. Besides, they need to increase the prices of their staff and cater for them. Direct tax collection seems impossible. Tax on 130 items has been dropped, while increased on 670 items whose details are not available yet. 

He said that the government failed to introduce a well-thought-out strategy for enhancing the production of key crops including cotton, wheat and oilseeds in addition to reducing the cost of production for farmers in the federal budget 2022-23. 

He expressed dismay that on one hand the government was rightly distressed over rising inflation, but on the other hand, it fell short of addressing the root cause of this alarming trend, which was a continuous downward trend in farm productivity. He also called for reducing the input cost of farmers which was increasing particularly due to an upsurge in power tariffs and an increase in rates of fuel.