FBR chief Shabbar Zaidi has been given a Rs5,550 billion tax collection target for the next fiscal year, said Finance Adviser Dr Hafeez Shaikh.
He was speaking at a press conference held in Islamabad. FBR chief Shabbar Zaidi, Special Assistant to the Prime Minister for Information and Broadcasting Firdous Ashiq Awan, Federal Minister for Power Omar Ayub, Minister of State for Revenue Hammad Azhar and Federal Minister for Planning, Development and Reforms Makhdoom Khusro Bakhtyar were also present on the occasion
He explained the situation of the economy after the previous government’s tenure ended, highlighting that the foreign loans Pakistan took had amounted to around $100 billion. In the previous government’s last two years, our reserves fell from $18 billion to less than $10 billion, he said.
The performance of exports in the last five years has been 0% and our deficit was $20 billion, said Shaikh, adding that the devaluation of the dollar had started by December, 2017 and the momentum of growth had broken while inflation was rising.
The immediate responsibility given to the [new] government was not to let things slip away, he said, adding that a basic structure needed to be made to better the situation.
So what did the government do to manage the situation?
Shaikh explained three measures taken by the government. Firstly, $9.2 billion was raised with help from friendly countries, including China, UAE and Saudi Arabia. Secondly, the interest rate was changed to manage inflation. Thirdly, imports were decreased as they increase the demand for dollars. This increased remittances.
The gap between imports and exports was decreased by $4billion, he said.
These measures, he said, helped let the situation from turning bad. He then said he wants to give a roadmap to the public on what is about to happen in the next few weeks.
Important decisions will be taken after the budget comes and we will keep the people informed, he said, listing down six points.
The first thing that we can expect in the next few weeks is the board approval of the staff-level agreement made with IMF, Shaikh confirmed, adding that programme will then be operational.
He said that the IMF loan was at an interest rate of 3.5 percent. He added that this was a lower rate than that of other programmes.
A lot of money is not part of the formal economy of Pakistan because of the benami law and policies of past governments, said Shaikh, explaining that a scheme has been created to plan how to make such cash, assets, real estate and money part of the formal economy.
Thirdly, an oil facility has been taken from Saudi Arabia which amounts to $3.2 billion per year for three years, he said, announcing that it will be operational from July 1. This facility will decrease the pressure off our foreign exchange reserves, he said.
Fourthly, we will be able to take an extra 2-3 billion dollars from World Bank and ADP after the IMF programme, said Shaikh, explaining that these loans will not be project-based, but programme-based. These loans had previously been halted, he said.
The fifth point on the agenda was the upcoming budget. Shaikh said the budget incorporates the government and Prime Minister Imran Khan’s determination to put the country on a path of continued and stable development.
The sixth point, Shaikh said, is that there is a deferred payment facility of the Islamic Development Bank of $1.2 billion.
“These are the six items which are good news,” said Shaikh, adding that it will bring confidence in the people and make a good platform to make the economy go forward.
The adviser said that the next year would be the year of stabilisation for the economy, during which the focus would be on saving the economy from different vulnerabilities and after achieving the target of stabilisation, the journey for growth will start.
He said that the upcoming budget for the fiscal year 2019-20 would come with austerity measures to reduce the government expenditures, adding that civilian, military and private sector would contribute in reducing fiscal expenditures.
Shaikh said that the government had also devised a comprehensive mechanism for gradual reduction of electricity losses from current Rs38 billion per month to zero by 2020.
He said that enhancing tax collection was imperative to provide relief to the vulnerable segments of society with the provision of subsidies in different sectors.
The finance adviser shared that only 2 million people were paying taxes in Pakistan, which includes 0.6 million salaried class, adding that 85% of the total tax was being paid by just 360 individuals or companies.