Miftah Ismail prescribes 'bitter pills' for rescuing ailing economy
Says Pakistan economy is in dire straits: IMF not happy but government trying to appease it: POL prices likely to hike again: PDL tax will increase inflation in country: Govt to bring 2.5 million traders in fixed tax scheme: 25,000 retailers will also be brought into tax net: Govt to encourage companies’ privatization
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Miftah was addressing a post-budget press conference along with State Finance Minister Ayesha Ghous Pasha, Information Minister Marriyum Aurangzeb, and FBR Chairman Asim Ahmad in Islamabad on Saturday.
After extending his gratitude to the economic team who toiled hard for the preparation of the budget documents, the finance minister lashed out at the previous government for leaving the economy in a tailspin.
He said the worsening government administration had caused huge damage to the national economy and drifted it to the verge of collapse that compelled the coalition government to present a tough budget.
He said that Pakistan was passing through a very difficult time. “That’s why we had no other option but to take difficult decisions to put the country out of economic morass,” he said adding that we were facing a budget deficit to the tune of Rs4.59 trillion. .
He said he did not foresee that oil prices would come down adding that ‘edible oil has become so expensive that we could not afford it’.
He said previous government failed to purchase LNG on time and the delay added to an increase in the circular debt. He said at present country was facing Rs500 billion circular debt. He said Rs1100 billion subsidy was given on electricity which means government is giving Rs16 per unit subsidy on electricity tariff, taking the total losses of the sector to Rs 1,600 billion.
The finance minister said that the new government has withdrawn subsidies on power and gas which stood at around Rs3,400 billion last year. He stated that the system which has been devised to determine the electricity prices is flawed. He pointed to drawbacks in electricity transmission and distribution system. If we do not rectify them, then our economy will have to bear so much pressure that it will eventually be sagged, he warned.
Miftah informed that Rs400 billion subsidy was given in the gas sector coupled with Rs1400 billion circular debt whereas the Sui Northern Gas Pipelines Limited (SNGPL) faced a loss of Rs200 billion. Gas valuing $2.4 billion was lost annually at the network of the SNGPL, which had never been accounted for.
He accused the previous rulers of selling LNG at $2 while the government was purchasing it for $20.
The finance minister, however, said that government would not shut down any factory. If the previous government had reached an agreement with any business entity for providing it gas at a subsidized rate, the new government would also honour the agreement, he vowed.
Miftah said that four big deficits in the country’s history were witnessed during the Pakistan Tehreek-i-Insaf government.
He said owing to the huge debts taken by the previous regime, the current government set aside Rs3,950 billion for debt servicing, which was equal to two defence budgets of the country.
The minister enumerated that the total revenue target had been set at Rs7,004 billion and if non-revenue resources were added it would take the total revenue to Rs9,000. Out of it, an amount of Rs4,000 billion would be the share of provinces, hence the net collection with the federal government would be around Rs5,000 billion.
He said if Rs4,000 billion were spent on debt servicing, then the amount remaining with the federal government would be a mere Rs1,000 billion to manage all affairs. If other liabilities were also counted, then the country would actually start the new fiscal year with minus Rs600 billion budget.
He also pointed out that in Sui Southern Gas, the Unaccounted For Gas (UFG) is 20%. We don’t know whether the gas is being stolen or it is just vanishing into thin air, he wondered.
Miftah was of the view that ‘we need to bring in structural reforms to revive our economy’. We were far ahead of Bangladesh and India in the 1990s but where our economy has reached now. If our economy becomes like Sri Lanka, people would not forgive us.
He said he only wanted people’s cooperation. “I’m not taking money home by increasing prices of petrol,” he said adding that he just has abolished subsidies on the gas and power sector. He said expenditures are increasing by 3%.
The finance minister said that former prime minister Imran Khan hoodwinked the entire nation by artificially not raising the POL and electricity prices. The country faced historic economic deficit during the previous regime, he added.
He said the International Monetary Fund was not happy with Pakistan. But we will talk with them. At this point in time, we have no other option but to take hard decisions and the budget is also part of this series, he elaborated.
The federal minister proclaimed that we have to tighten our fiscal affairs and reduce our expenditures. We are not utilizing even 5% of our resources. He said that the government has introduced a fixed tax scheme for traders.
FBR Chairman Asim Ahmad said that the government would bring 2.5 million traders in this scheme.
State Minister for Finance Ayesha Ghous Pasha said that the difficult economic decisions were taken to steer the country out of the crisis. The government is trying its best to put less and less burden on the masses. She said that the government has increased funds for the social safety net for the downtrodden segment of society. Concessions have been provided to the agriculture sector in order to boost yield at the local level so that inflation could be brought down.
Answering a question, Finance Minister Miftah said the government would bring into tax net more than 25,000 retailers by imposing a minimal tax on them. He said the things which have been left in the budget, would be included later. He said there would be small changes in the budget in the next 15 days.
On POL prices, the federal minister said it does not look like the prices would decrease internationally. When we impose the PDL tax then it would definitely raise inflation in the country. If the government hikes petrol prices, this money would be spent on people. He said the government wanted rich people to contribute more to save the country from economic disaster.
Miftah said that the Shehbaz Sharif-led government wanted to take companies to privatization. He said that soon the work would be complete on companies that have been marked ‘ready for sale’ by the privatization commission.
On the EOBI privatization, he said we would see it later.