Miftah Ismail hopeful of improvement in economic indicators

Next programme with IMF will be finalised easily, says former FBR chairman Shabbar Zaidi.

Web Desk
March 30, 2024

KARACHI: Former finance minister Miftah Ismail Friday said the economy is moving towards betterment and the growth will also improve if it stays that way for the next two to three months following Islamabad’s expected talks on a new programme with the International Monetary Fund (IMF) in April.

“I think the dollar market is currently stable, inflation is decreasing and this is a good time,” the former minister said during his appearance on Geo News programme ‘Aaj Shahzeb Khanzada Kay Sath’.

Ismail's comment comes as Pakistan is set to hold a meeting with the global lender on April 14 and 15 in Washington on a larger and longer loan programme.

Sharing his thoughts on the economy during the show, the former finance minister added that the State Bank of Pakistan (SBP) is currently buying dollars and there is no restriction on imports.

He lauded the swift decisions taken during the caretaker government by former interim finance minister Shamshad Akhtar and appreciated Muhammad Aurangzeb for maintaining the trend.

“If the next programme with IMF is finalised between June and July, it will all be good.”

However, he mentioned that the Washington-based lender doesn’t trust Pakistan as much in terms of reforms.

“If we fail to revise the National Finance Commission (NFC) Award and don’t carry out important reforms including privatisation, we will not make any progress.”

When asked about the possibility of a new IMF programme in light of increasing the tax base and whether this will be practically possible to resurrect the economy, he said: “The difference this time is that it is a requirement from the IMF and it will not step back.”

The former minister said this has to be done because there is no turning away from it.

“You have imposed as much tax as you could on the salaried class. You have now left agriculture income and property, which is not taxed by provinces because it has a lot of money, while the government does not impose taxes on services. You can’t let these three get away with it. This is injustice with the country if you do so.”

Ismail said that there is no option other than imposing tax, adding that the IMF understands that a major sector is out of the tax net, which cannot work like that anymore. The minister also lamented the exemption given to retailers.

He added that agriculture income should be transferred from provinces to the Centre so that no one can evade tax.

‘Next programme with IMF will be finalised easily’

Meanwhile, former chairman of the Federal Board of Revenue (FBR) Shabbar Zaidi also hoped that the next programme with IMF will be finalised easily.

Recalling the statements made by former prime minister Imran Khan during the Taliban’s return to power in Kabul, Zaidi said the consequences of the statements were felt in Pakistan, as they weren’t appreciated at the time.

“Since that statement, our relationship with Pakistan's largest lender and its supporter had deteriorated, which has gradually improved,” he said, speaking on the Geo News show, flanked by Ismail.

Zaidi also recommended revisiting the NFC award.

When talking about tax reforms, the former FBR chief insisted on mapping to include traders in the tax net, which, he said, is a long-term process.

He also agreed with the former minister on not leaving any sector out of the tax net, as Pakistan does not have a choice anymore in that regard.

“We no longer have any space. We cannot increase tax for individuals and companies more than what it currently is.”

The ex-FBR chief said that while shopkeepers have the power to shut down their shops and cause an artificial shortage of essential commodities, the nation must stand with the government to force them into paying taxes.

“It is important to end this discrimination for Pakistan, as one person is paying 35% tax while another pays 0%,” he said.

He added that the FBR does not have data related to the number of shops in markets across the country.

“When Bangladesh imposed a tax on retailers, they went on a strike for 15 days. But would our media or society allow a strike like this for even one day? This is Pakistan’s problem,” he lamented.

Responding to a question about smuggled goods being sold by retailers and how that can be brought into the tax net, Ismail said gold dealers told him they have to pay 17% sales tax, but no one gives that kind of tax.

“Back then it was 17% and now it is 18%. They don’t pay. Other than that, they also had to pay 20% on import and income tax was separate.”

The former minister said he wants every faction of the economy to pay tax. Talking about restricting smuggled goods, he said that they need to be stopped at the borders and airports, as they cannot be stopped from being sold once they enter the cities.

“It is the job of customs and other law enforcement agencies to stop it at the border.”

Zaidi said that the provincial government must enforce its market committee system to control smuggling.

He also spoke about tax being an urban concept and not being applied to rural areas.

“We need to decentralise the tax system into smaller cities.”