Former Federal Minister for Foreign Affairs Shah Mahmood Qureshi has indicated that the country is likely to miss all major budget targets in the forthcoming fiscal year. The government has set an unrealistic and overambitious revenue collection target of Rs1.952 trillion which will be impossible to achieve.
Qureshi was speaking at the Post Budget Conference organised by the Pakistan Thinkers Forum here on Thursday. He pointed out that the government had made a cut of Rs100 billion from the Public Sector Development Program (PSDP) during the current fiscal year and the situation would not be much different in the next fiscal year.
He said that the government prepared the federal budget on the dictation of the International Monetary Fund (IMF) and other international agencies.
The economic managers have created many cushions in the federal budget for future IMF talks. He underscored that the entire federal budget was based on assumptions. On the one hand Economic managers were claiming that the country had meager resources for development, while on the other hand the government had earmarked Rs730 billion for development. He asked the economic team to elaborate where the government would get this huge sum of money.
He also pointed out that figures in the federal budget reveal that rate of unemployment would further jump up during the next fiscal year, as the country required a minimum of six per cent GDP growth to maintain the present level. Qureshi estimated that the country needed over seven per cent growth to address the unemployment issue. However, the government had projected 4.5 per cent growth target in the federal budget.
He said that the country had a persistent fiscal deficit of six per cent, which will increase in the next financial year. Whereas, revenue collection will hardly touch Rs1.540 trillion during the next fiscal year, he estimated. Speaking about the mounting rate of inflation, he asserted that Pakistan had one of the highest food inflation rates of 18.4 per cent.
The economic manager claimed that inflation was a result of high oil price in the international market, which was beyond the control of the government, but this impression was not true. Qureshi believed that oil inflation was the result of compound taxation, which has been the easiest way for generating revenue for the government.
He pointed out that the average figures of last three year revealed that sugar prices have increased by 152 per cent, edibles oil and beef by 85 per cent, meat 87 per cent, rice 57 per cent and pulses by 122 per cent. Qureshi was of the view that the country witnessed an agriculture growth of 1.9 per cent, which in per capita terms was negative.
However, instead of giving relief to the agriculture sector the government had put an additional burden of Rs44 billion on it by imposing a General Sales Tax (GST) on agriculture input. He said that agri income tax was just a buzz word, and instead “all incomes should be taxed regardless of its source.” Qureshi said that the country’s tax policy was distorted. Pakistan has 64 per cent indirect taxes, which is one of the major flaws in the taxation system.
Former Federal Minister for Religious Affairs Muhammad Ijaz-ul-Haq blamed bad governance as the root cause of all economic problems. Echoing Qureshi, Ijaz-ul-Haq said that in Pakistan the government did not make the budget, it was prepared by foreigners. He pointed out that on the one side all political leaders were talking about austerity measure while on the other side the government had increased the budget allocations of Presidency and PM House, which clearly represent the government’s stance on austerity.
Punjab former Finance Minister Hasnain Dreshak pointed out that the collection of the agriculture income tax is the provincial government’s responsibility, which is failing under present laws. He indicated that the law has given exemption to small land holders of 12.5 acres, and land holdings are shrinking rapidly. He underlined that every year a substantial number of taxpayers were opting out from the tax net owing to division in land holding. He stressed that there was a dire need to reform the taxation system as it was unjust and unrealistic.
Pakistan Thinkers Forum’s Sheikh Qaiser Ahamd in his welcome address said that the country has a budget deficit of Rs6.5 billion, which is being met through borrowing or printing new currency notes. He said the government was borrowing or printing Rs1 trillion currency notes, despite the fact that the country had the highest inflation in the region.