Adviser to PM on Finance Hafeez Sheikh said on Wednesday the government was compelled to increase taxes in order to avoid loans from the central bank as it would have caused further inflation.
Sheikh said so while addressing a session of the National Assembly on Wednesday. He said the government decided not to borrow from the State Bank of Pakistan as it would have further increased inflation.
“This left us with keeping a strict check on our expenditures, hiking taxes and creating an atmosphere to benefit the people,” the finance adviser said.
He said the government, despite the lack of funds, made sure it provided for two segments of the society in the budget. These included individuals facilitating exports and the ones at the lowest level of poverty.
For the latter, Sheikh said, the social safety net budget was increased to Rs192 billion from Rs100 billion. “It has never happened in Pakistan before,” he added.
Social safety net programmes provided cash transfers to women, small-scale loans for youth, health facility and ration cards, he said.
“Our Kamyab Jawan programme aims to facilitate young people who seek to do business,” Sheikh said, urging the youth to benefit from the programme.
He said the government levied no tax on exports, besides providing subsidy to exporters on electricity and gas. “We understood that interest rates were high so we came up with giving loans to exporters on lower rates.”
The government reduced tariffs on some 1,660 raw material lines in order to boost their input, according to the finance adviser. He said the efforts resulted in growth of exports in the first seven months of this fiscal year.
About the current account deficit, Sheikh said the government brought it down to $13 billion from $20 billion last year. “We have now, in just seven months [into this financial year], brought it down to $2 billion.”
He said the fiscal deficit target, which was earlier set to be 2.7%, was successfully reduced to 2.3% of the budget.
The finance adviser said while tax income was generated through the surge in tax rates to 17%, the non-tax revenues also soared to 170%. “The target for non-tax revenue is being set at Rs1.5 trillion now for the current year from Rs1.1 trillion previously.”
The International Monetary Fund in its review report stated that Pakistan had met all performance criteria with “comfortable margins”, he said.
Sheikh praised SBP Governor Reza Baqir, saying the country should be proud of him. He said Baqir gave up a lucrative job at the IMF to serve his country.
“It can’t be that we first urge people to come to Pakistan, and when they do, we claim they are not patriotic,” he said.
He said when they started preparing the budget, there were some serious challenges and freezing the defence budget was the toughest of them.
Sheikh, however, said they were fully supported by Army Chief General Qamar Javed Bajwa.