The Pakistan Industrial and Traders Association Front (PIAF) has called for limiting government expenditures and the high cost of debt servicing to contain the budget deficit. Pakistan’s federal budget deficit projection has been revised to over Rs5.4 trillion, highlighting the unending fiscal woes that have pushed the country into a debt trap.
The PIAF Chairman Fahimur Rehman Saigol, Senior Vice chairman Nasrullah Mughal and Vice chairman Tahirm Manzoor Chaudhry in a joint statement said that the high cost of doing business has been hurting the economic growth and industry, which faced the brunt of a staggering increase in gas prices.
Fahimur Rehman Saigol said that the failure to reform the tax system is a major factor behind heavy domestic and foreign borrowings by the government.
Expressing serious concern over the high jump in country’s budget deficit, Senior Vice chairman Nasrullah Mughal said the revision has been made in light of agreement with the International Monetary Fund, which exposed the massive underreporting of expenditures at the time of budget presentation by the finance ministry. This is a highly unsustainable level and has already pushed the country into a situation where debt restructuring seems to be the only viable option.
The Vice chairman Tahirm Manzoor Chaudhry maintained that the failure to reform the tax system and increase revenue collection is a major factor behind heavy domestic and foreign borrowings by the government.
He said that the privatization commission of Pakistan is struggling for months to effectively put in place the privatization of loss-making public sector enterprises; notably, the Pakistan Steel Mills and Pakistan International Airlines despite the urgency and concern expressed, time and again, by the IMF.
The decision-making processes are likely to be driven and influenced more by conflicting self-interests of the coalition partners, watering down the key objectives. This is not what the country needs in these unprecedented times of political and economic challenges confronting the nation.
There has been over-emphasis on increasing taxes, which has shifted focus away from growing expenditures that are increasing at a pace of 24% during the current fiscal year despite single-digit inflation. For March, the FBR's target was Rs1.219 trillion. However, despite taking advances and drastically slowing refunds, it could only cross Rs1.1 trillion till Friday evening. The FBR paid Rs34 billion in refunds, down by Rs37 billion, or 52%, compared to March last year.
The PIAF leaders said that the IMF has forced the country to impose new taxes, primarily burdening the salaried class and levying taxes on nearly all consumable goods, including medical tests, stationery, vegetables and children's milk.
For the July-March period, the FBR missed its targets for sales tax, federal excise duty (FED) and customs duty but exceeded the income tax target.
They said that the FBR half-heartedly pursued the Tajir Dost scheme but the IMF clarified that the scheme has remained operational. The IMF has cut the collection estimate of Rs50 billion from the Tajir Dost scheme.
Sales tax collection stood at Rs2.86 trillion, Rs656 billion less than the target of over Rs3.5 trillion. Sales tax remained the most difficult area for the FBR and one of the reasons for the low collection was less-than-estimated growth in large industries.
Pakistan’s government liquidity and external vulnerability risks will remain very high until there is clarity on a credible longer-term financing plan.
It said Pakistan’s foreign exchange reserves remained very low, sufficient to cover only about six weeks of imports and well below what was required to meet external financing needs for the next three to four years.