PML-N govt won’t ask IMF to bail it out

• Miftah says govt has secured $1bn financing to help raise forex reserves, confident of achieving 11% growth
• Says federal budget includes incentives as well as revenue generating measures
• Finance minister may contest upcoming general election from Karachi

ISLAMABAD: Newly-appointed Finance Minister Miftah Ismail said on Saturday that the Pakistan Muslim League-Nawaz (PML-N) government has no plans to approach the International Monetary Fund (IMF) for a bailout package before the end of its tenure.

Speaking at a post-budget press conference in the federal capital along with Prime Minister’s Special Assistant on Revenue Haroon Akhtar Khan, the finance minister said the measures taken by the government since December 2017, including changes brought to the currency markets will help it avoid seeking another bailout.

Ismail revealed that the government has secured a $1 billion financing on Saturday which will help raise the level of forex reserves at the State Bank. He said the budget for next fiscal year has been prepared by all departments of the government jointly and congratulated them for their efforts.

Terming it a “conservative budget”, he said the government was expecting the GDP’s nominal growth to be slightly above 12 per cent next year, but tax revenues have been estimated to go up by 11pc only. “So we are very confident that we will achieve the 11pc growth,” he added.

Ismail said the relief measures in the budget are accompanied by tax measures, which he said were aimed at facilitating existing and new taxpayers. The government doesn’t expect issuance of many supplementary grants during the year because all actual expenses have been counted in the budget, he said.

Rejecting the impression that the budget was largely expenditure and incentives oriented, Miftah said that it includes incentives as well as revenue generating measures. “Along with incentives, tax exemptions and other facilities, the budget for 2018-19 would ensure an increase in revenue as the government has increased taxes on cigarettes, cement, luxury items and steel,” he said.

It is pertinent to mention here that the government announced various incentives and exemptions in the budget on Friday, without justifying how and from where the revenues will come from to pay for all these windfalls.

“Though I rejected various demands of the ministries and other departments keeping in view the budgetary constraints, I could not reject the demands made by Minister for Food Research and Security Sikandar Bosan and were all incorporated in the budget,” the finance minister said referring to incentives given to the agricultural sector.

Apart from incentives, he said that the government has led to a 5 per cent decrease in taxes at the rate of 1 per cent per year. “We will bring it lower,” he added.

Speaking about the condition of distribution of dividend, Miftah said, “It is a good condition to force companies to give dividends to shareholders, and imposing a small 5 per cent tax if they don’t.”

“Super tax is 1 per cent, 3 per cent for corporations and 4 per cent for banks, these will end in the coming years,” Miftah said.

‘BUDGET LOOKS OUT FOR LOCAL INDUSTRIES’:

Stressing that the export promotion needs to increase and import dependency needs to crack, Haroon Akhtar said, “Duties on raw materials are low and the local industries need to be protected. Our budget looks out for the local industries,” he said.

Tax on the film industry, car production, LED lights, port of coal, customs duties, sales tax on firefighting vehicles – due to their high demand have been reduced to 10 per cent.

In reply to a query that he needed to contest the election within six months after taking charge as un-elected federal minister, Miftah said that he may contest election from Karachi.

He said that he would contest the next general election from NA-243 and NA-244 seats, as recommended by Prime Minister Shahid Khaqan Abbasi, and hoped that he would get votes as the package announced by the government for the megacity was historic and the Sindh government could not announce the same in 25 years.

In reply to a query regarding current account deficits, Miftah repeated his stance that with the reduction in trade deficits, as expected with the growth in exports, the current account deficit will be reduced as both deficits were interlinked.

Replying to the same question, Haroon said that the government has taken two major steps to improve the current account deficit: it announced an export package that helped trigger exports and increased them by 13 per cent in the last nine months and imposed a regulatory duty on luxury items. The government also resorted to currency devaluation twice in order to deal with the issue.

Praising the performance of the FBR, the duo informed that the revenue had doubled with a growth of 20 per cent. “Alternate dispute resolution committee has been formed and their decision is binding, this a huge relief provided to the business community,” Haroon said.

To another question, Miftah said that the overall circular debt of the power sector stands at Rs400 billion and with fund releases in near future, the payables would be around Rs350 billion. “This too could be paid in a few installments,” he added.

Regarding taxes on transactions from abroad, the de-facto finance minister said that if foreign transactions crossed Rs10 million, questions would be raised about the legality of the money. “Otherwise, taxes would be introduced,” he added.

Miftah said that the inflation had been kept at an average of 4.5 per cent and fiscal transfers to provinces have increased from Rs1, 300 billion in 2013 to Rs2, 300 billion in the upcoming financial year

Addressing the reporters, Haroon Akhtar said that the government has taken two major steps to improve the current account deficit: it announced an export package that helped trigger exports and increased them by 13 per cent in the last nine months and imposed a regulatory duty on luxury items. The government also resorted to currency devaluation twice in order to deal with the issue.

Haroon said that there was ‘no need to panic’ as the government has already taken tried and tested measures for the economy and they have proven fruitful.