Monday Jan 03, 2022
The International Monetary Fund's (IMF) pressure influenced many of the government's decisions, says Federal Minister for Finance Shaukat Tarin.
The comment came while the finance minister spoke about a number of issues, including Supplementary Finance Bill 2021, State Bank Amendment Bill, inflation, prior actions demanded by IMF and other core issues related to finance on Geo News programme Geo Pakistan.
The minister, terming the geo-political situation of the region as a reason for the Fund being assertive, said that the talks with the lender aiming to restore the US $6 billion Extended Fund Facility (EFF) were not a piece of cake after the US pullout of Afghanistan.
He said that another reason was the withdrawal of the former finance team's from the government's commitments made in March 2021 with the lender while borrowing a few million dollars as a loan.
The minister said that the Finance Supplementary Bill and State Bank of Pakistan Amendment Bill 2021 have been presented in the National Assembly (NA) after Cabinet's approval and now the government will try to get both the bills approved as soon as possible.
He further stated that a detailed briefing has been given to the "allies" to take them into confidence over the bills presented in the NA and their apprehensions have been addressed.
"Our allies were told that complete bill volume is not more than 343 billion and they understood it," Tarin said.
About the possibility and deadline of the finance bill's passage, Tarin expressed hope that it will sail through easily and would be enacted by Parliament within the given time frame as committed to the IMF.
He went on to say that the IMF can be informed that the process has been started once the NA approves both the bills.
"We have asked IMF to schedule a meeting on January 12, and they have agreed to convene a meeting," he added.
"It may take 3 to 4 days more beyond the important date of January 12, when IMF board is going to approve the 1 billion US dollar tranche."
Talking about the other bill tabled in the National Assembly, which deals with the autonomy of the State Bank of Pakistan (SBP), Tarin made the point that this bill was needed to be passed by the Senate as well, and he expressed the hope that this bill, too, will be passed. "We have taken our allies into confidence and briefed them on every aspect of the bill and their apprehensions were addressed."
Elaborating on the idea of the autonomy of the SBP, the minister said that the SBP was being given independence but the bank can never be separated from the Government of Pakistan and the role of the finance ministry cannot be eliminated.
Abolishing the policy board won't make a big difference, the finance minister stressed. When asked about the coordination between the governor SBP and finance minister, Tarin replied that he speaks with the governor at least thrice a day on issues and the perception about misunderstanding and differences between them was wrong.
The political and financial implications of the Supplementary Finance Bill and State Bank Amendment Bill also came under the scope of the discussion in the programme.
"We are not imposing new taxes in the mini-budget, but withdrawing tax exemptions amounting to Rs343 billion."
He reiterated the point that the common man will have to bear the hit of Rs2 billion only and tax exemptions were being withdrawn from items the elite class uses.
He said that raising the tax collection target to 6.1 trillion rupees from the previously-set target of Rs5.9 trillion is not a compulsion made by the IMF.
"We offered Rs6.1 trillion ourselves, keeping our record collection in the first half of year, which is well beyond the target."
In reply to a question that if tax collection won't inflate with this withdrawal of exemptions, then what is the purpose of the whole exercise and why the IMF has been pushing for it, Tarin said that it was done to document the economy as several sectors were not documented.
Shahzad Iqbal asked if it was merely for the purpose of documentation, then why had the tax rate in certain sectors been raised, as it could be documented on the existing rate.
"IMF is of the view there should be uniform sales tax in all the sectors and then subsidies or refund, whatever needed, should be granted."
The rise in Consumer Price Index (CPI) was also discussed during the show. The finance minister agreed that there was a rise of 12.1 percent year-on-year CPI data recorded in December 2021.
Tarin further said that there was another angle to see the things; rather than comparing data to statistics of last year, it should be taken that prices went down in December, as compared to November.
"Our approach is half-glass full and your approach is half-glass empty," Tarin said.
He termed this rise in prices as a dependent phenomenon as we import commodities and global commodity prices are on the rise, but this global cycle can't stay for long as the world is taking steps to bring the prices in control.
"We need to do several things right, we will have to take measures to curb rupee depreciation, we need to work for control on supply chain of commodities and idea of cold storages of commodities."
He also stressed the point that he was clear in approach and will keep on expressing his heart and mind on issues.
"We negotiated with the IMF and the rupee showed a recovery and it will show more improvement when we will get the tranche."
He endorsed his view about the rupee being undervalued unnaturally. He said that the SBP was proactively working now in this regard.
"I made my views clear and categorically conveyed it to governor SBP and commercial banks that how overprofiting was being practised," Shaukat Tarin replied.
Shahzad Iqbal asked if he was satisfied with the decisions being taken by the government.
"Things are shaping up in the right direction," Tarin answered.
He further added that he still believes that if capacity payments is one issue, line-losses is the other issue which is costing us badly; we need to fix this as well and performance of DISCOs need an improvement.
"I pray that we leave the IMF once and for all now. If we were doing well, then what was the need to go to IMF?"
The finance minister also spoke openly about the bitter facts like the mood of IMF, saying that the petroleum levy in fuel prices has been increased as per the IMF's demand.
"We had cut down the sales tax on petroleum products to zero but were compelled to apply the petroleum levy due to IMF's strict behaviour," said Tarin, adding that the IMF had lent the country some money back in March 2021 on account of an increase in the petroleum levy.
The minister said that the Finance Supplementary Bill and State Bank of Pakistan Amendment Bill 2021 have been presented in National Assembly (NA) after the cabinet's approval and now the government will try to get both the bills approved as soon as possible.
The finance minister said that the tool of targeted subsidy was still with him when asked about taxation on 850cc vehicles, solar panels and point of sales, which should have been incentivised as per the government policy to encourage its use. The minister showed reluctance on commenting openly on the growing trade deficit and current account deficit.
"Razak Dawood should be questioned about this."
He predicted that the trade deficit would be lower in the next half of the fiscal year, citing no need for importing wheat, sugar and vaccines like last year.