Economic growth of Pakistan, termed most dramatic

[BATMAN]

Banks set fast pace of economic headway for Pakistan: A report

http://www.app.com.pk/en/index.php?option=com_content&task=view&id=9368&Itemid=2

LONDON, May 21 (APP): The economic growth of Pakistan has been described as one of the world's most dramatic turnaround stories, says a report in May's issue of The Banker, a leading magazine in the global financial industry.

In his article on Pakistan, writer Jules Stewart says Pakistan looks set to achieve economic stability, a goal many thought impossible.

Pakistan, he wrote, was a verge on default in 1999 when President General Pervez Musharraf came into power. His Finance Minister and now Prime Minister Shaukat Aziz put in place an urgent package of macro-economic reforms aimed at stabilising economy.

At that time Pakistan was facing an external debt of US $37 billion, coupled with huge fiscal and current account deficits.
Tax revenue was almost non-existent, exports were stagnated and foreign exchange reserves had shrunk to a dangerously low level.

The stabilisation plan put in place was highlighted by exchange rate liberalisation and the strengthening of foreign reserves, which now stand at over US $ 13 billion compared with US $ 1 billion when the programme was launched. In this period, domestic debt as a percentage of GDP has been managed down to half the 1999 level.

Although, according to Stewart Pakistan has not been able to completely eliminate the imbalances in its economy but a leading banker Farrukh Khan of BMA Capital has spoken about strong foreign direct investment inflows, along with remittances and the ability to borrow in international markets.

However, the writer has noted long term, imports and exports need to come into balance. According to Khan, domestic demand has been the engine of growth. Between 20 million and 30 million people now earn US $ 8000 to $ 10,000 a year, making the current rate of growth sustainable.
He also says the general election later this year does not pose a threat to the reform process. The present government has been most aggressive in taking the reforms forward. Those living below poverty level account for 25% of the population, compared with 33% a few years ago.

Stewart says nowhere have these reform efforts been more apparent than in the banking sector. Seven years ago, more than 80% of the banking system was under state ownership. That figure has since been reversed with nearly 90% in private hands and the consolidation process continues.

Standard Chartered was the latest of the big ticket acquirers, having recently paid nearly US $ 500 million for Union Bank, one of the most dynamic players in Pakistan's banking sector. More takeovers are in the pipeline.

The article has quoted another leading banker Reza-ur-Rahim of JP Morgan as saying that law and order scarce has been blown out of proportion.' We need to portray the softer side of Pakistan because the actual situation is quite different in what people see on their television screens. A lot is going well in Pakistan. FDI is up, privatisation is moving ahead, the deficit is under control, poverty is reducing and the government is not letting the upcoming elections dictate their policy decisions.

The government, says Stewart is now pushing for the second generation of reforms, a task being handled by Ashfaque Khan, Director-General of the government's debt office who is responsible for monitoring the implementation of the new Fiscal Responsibility and Debt Limitation Act, which binds current and future governments to abide by prudent economic policies.

In this regard according to Khan a number of objectives have already been achieved. For example, public debt which should not be more than 60% of the GDP by 2012/13 fiscal year has been reduced to 52% level. The yearly reduction of public debt by 2.5 percentage point relative to GDP has gone up to 6.5%.

Khan says that once the current high demand for imported capital goods has been satisfied, the current account deficit will decline to normal levels.

In his interview with Governor, State Bank of Pakistan, Shamshad Akhtar, she says financial reform needs a progressive mindset which the present government has provided. Akhtar pointed out that the SBP monetary policy looks at the dual objectives of promoting growth while maintaining price stability.

 

[Shehz]

http://www.brecorder.com/index.php?id=567145&currPageNo=1&query=&search=&term=&supDate=

GNP to reach $150 billion, per capita income $950 this year

RECORDER REPORT
ISLAMABAD (May 22 2007): Despite high international oil prices and devastating earthquake 2005, the economy has grown on an annual average of 7.5 percent during the last four years 2003-06. This year, 2006-07 by achieving growth rate of over 7 percent, the GNP would reach about $150 billion and per capita income around $950.

The growth is broad-based agriculture sector particularly on account of wheat, pulses and sugarcane production and livestock development has achieved a high growth rate of 5 percent in 2006-07, large-scale manufacturing has grown in double digits and growth in services sector has also been robust.

Total investment has increased tremendously in recent years. It reached all-time record level of Rs 1,900 billion in 2006-07 and National Savings at Rs 1,500 billion.

Total foreign investment is rising every year. This year it is expected to reach to $6 billion - highest in South Asia. The workers' remittances an important component of national savings is increasing fast. It will be around $5.5 billion by end June 2007. Tight monetary policy is pursued by the State Bank of Pakistan to control rising inflationary pressures.

The fiscal accounts have considerably improved in recent years. Revenues are buoyant, expenditures are rationalised. Revenue deficit is eliminated and public debt and fiscal deficit has been brought to a sustainable level. It is expected that CBR collection would exceed the target of Rs 835 billion in 2006-07.

Although the trade deficit is on the higher side, rising FDI and workers' remittances over $6 billion and $5.5 billion respectively would keep the external account position comfortable. Foreign exchange reserves currently stand around $14 billion expected to reach around $14.4 billion by end June representing about seven months of imports an improvement of $1.1 billion over the last year level.

The public expenditure on social sectors has increased from Rs 103 billion in 2001-02 to Rs 228 billion in 2005-06 reflecting an increase of 22 percent per annum.

The pro-poor expenditure has also increased sharply by 27 percent annually from Rs 180 billion 2001-2002 to Rs 464 billion in 2005-06. In terms of GDP, the expenditure during this period has increased from 4 percent to 6 percent.

Poverty has declined significantly from 34 percent in 2001 to 24 percent in 2005. Situation should further improve with the good agriculture growth this year. Unemployment rate has declined from historically high level of 8.3 percent in 2001-02 to 6.2 percent in 2005-06.

Knowledge based economy, technology driven development, innovation, value addition, and establishment of quality/accredited laboratories and achievement of MDGs and long-term objectives of the Vision 2030.

For this purpose, Planning Commission is striving hard for just and fair treatment to all and carries everybody along in development of every inch of Pakistan on the basis of equality. Smooth working, growth and equitable development are underlying principles of our development process.

 

[niaz]

Despite high growth rate "Trickle Down" effect is hardly noticeable. However Rich are definitely getting richer. IMO our tax collection is FAR too low. Direct taxation base needs to be widened further and all the money thus generated should be spent on Education and Health. Specially for the provison of 'Potable' water to every one.

We have been discussing tax on Agricultural Income for decades. The collected amount is abyssimal compared to other countries. If the big landlords ( most of them are MNA's and MPA's) wont pay, water charges should be increased. Where is the money for reduction in povert will come from if not thru taxation ?? and Tax Reforms must be top priority in the coming budget.

 

[Shehz]

The inflation rate had whalloped to 11%, and it has now come down to 8%, which is still steep. I would like to see it come down to 5%.

Considering that in a population of 150 million, the tax base is negligible. Despite all efforts made by CBR in the recent past, the number of total tax payers in Pakistan has not been able to go beyond 1.5 million taxpayers, who were being squeezed for the past so many years.

Income, wherever generated and from whatever source, should be taxed. When there is a level playing field, people will feel proud of paying their taxes. Instead of pride in paying taxes in Pakistan, there is instead a feeling of resentment here as the tax system does not appear to be equitable and socially just to all segments.

According to economists, there should be atleast 3 million taxpayers in the country and the low numbers of taxpayers had meant that the government had increasingly been relying on indirect taxes to raise revenues to meet expenditures. The incidence of indirect tax falls on the poor segment of our society and fuels inflation. The present government needs to reduce the direct tax rates and increase the tax base. Every new commercial entity, be it retail, a doctor's clinic, or a workshop, should first take an NTN (mandatory) before being allowed to get any utility connections.

The government is currently reviewing the entire taxation system and looking for areas in need of rationalization (atleast they claim they are), and to increase the tax base, otherwise the existing 1.5 million taxpayers in a population of over 150 million would continue to be squeezed, thus, directly affecting the inflation, which will in turn play havoc on the poor and middle class, evetually destroying Pakistan's economy.

 

[MirBadshah]

Just wait for this budget, government is going to impose tax on agriculture income, it will increase the tax net to almost 100%, after that come the professionals, if Musharaf don had made this stupid mistake of CJ, he was able to catch lawyers with service tax and include more doctors, now its not possible.

But the biggest tax avader is Middle man or trader, most of the business are not even registerd and they earn more then industrialists and land lords but pay nothing in taxes.

The best approach to widen tax net would be declearing any business illegal unless it is registerd with Tax authority, just like US, strarting right from a tea stall to corporate, and every business owner must submit the lists of assets with tax returns.

Goverment is not leavieng any new tax in this budget because this is election year, after that you will see a mega project to catch all big fishes in tax net.

The present tax payer is realy unable to pay anything more, you squeze them and they will die, but with wider net and transpartent collection system the revenues can increase many times.

BTW have to read today? The all tax collection is going under one roof in this budget, income tax, sales tax, everything, that would be a batter approach.

 

[Shehz]

I agree with you that the income from agriculture has never been acounted for, and agriculturist needs to get into the tax bracket as well. Without proper statistices we can't determine which is the bigger sector of non-tax paying entities.

Now said that, one should not ignore the other sectors either;
1. Sugar & Cement Mills, are amongst the biggest evaders
2. Capital gains tax from Stock Exchange transactions
3. Real Estate (there's no way of calculating their profits)

Indirect taxes of 15% in the shape of sales tax will only be a burden on the poor and the middle class, which is not helping the economy in anyway as inflation is increasing almost directly proportionately.

It's just like saying we collected Rs. 100 today more on indirect taxes, but that pushes the cost of sugar and tea up by Rs. 3 / kg, fuel prices up by 50 paisas, bus fares up by 25 paisas, minimum wages are just the same, unemployment is high, and 7 people lost their jobs today. But wow, we collected Rs. 100 more today.

Sales tax should be decreased to at-least 10%, Pakistan is a poor country, and so are the majority. Direct taxes need to be curtailed by 7% also, so that industrialist should stop evading it altogether. The need of the hour is to increase the taxpayers net, and bring all income generating sectors in, regardless of their vote bank and political affiliations. All these agriculturists, services, stock exchange giants, etc., are living in major cities, contributing nothing, reaping the fruit of the developments, and are always the first ones to cry foul that the government is not doing enough. They need a lesson in patriotism that loving it is not sufficient, they need to care for it as well.

A good article on Pakistan Tax Policy Risk: http://www.tmcnet.com/usubmit/2007/02/22/2361977.htm

 

[1pakistan]

I agree with you that the income from agriculture has never been acounted for, and agriculturist needs to get into the tax bracket as well. Without proper statistices we can't determine which is the bigger sector of non-tax paying entities.

Now said that, one should not ignore the other sectors either;
1. Sugar & Cement Mills, are amongst the biggest evaders
2. Capital gains tax from Stock Exchange transactions
3. Real Estate (there's no way of calculating their profits)

Indirect taxes of 15% in the shape of sales tax will only be a burden on the poor and the middle class, which is not helping the economy in anyway as inflation is increasing almost directly proportionately.

It's just like saying we collected Rs. 100 today more on indirect taxes, but that pushes the cost of sugar and tea up by Rs. 3 / kg, fuel prices up by 50 paisas, bus fares up by 25 paisas, minimum wages are just the same, unemployment is high, and 7 people lost their jobs today. But wow, we collected Rs. 100 more today.

Sales tax should be decreased to at-least 10%, Pakistan is a poor country, and so are the majority. Direct taxes need to be curtailed by 7% also, so that industrialist should stop evading it altogether. The need of the hour is to increase the taxpayers net, and bring all income generating sectors in, regardless of their vote bank and political affiliations. All these agriculturists, services, stock exchange giants, etc., are living in major cities, contributing nothing, reaping the fruit of the developments, and are always the first ones to cry foul that the government is not doing enough. They need a lesson in patriotism that loving it is not sufficient, they need to care for it as well.

A good article on Pakistan Tax Policy Risk:

Bro can u clarify these points. When u mentioned real estate do u mean "tax payable by Agent" or "firm" or do u mean that when ppl sell property they should pay tax on profit.

Well i think better system would be to make real estate agents pay tax on their income as they are doing business like anyother sector. However, those in the business of property development and buying and selling property should pay CAPITAL GAINS TAX. SO capital gains shouldnt be limited to Stock Exchange but on all ASSET transaction whether that be housing or shares.. Some ppl also invest in jewellery ( mainly gold and dimond) they also should be subjected to CGT unless one is inthe business of minning.

 

[Shehz]

It's both ways merey bhai.

Real Estate agents are not registered, who can verify how much comission they earned from which sale(s)? Neither can you verify how much property they have personally, or for that matter, any individual or entity.

Our current systen, and/or database, does not have the provision of acertaining tax receivables, as yet. Sole proprietors pay like 10,000 bribe and declare losses (gas station owners, parchoon ki dokaan, etc.), kapra market retailers and wholesellers earn in millions, yet dole out zero. Same goes for agriculturists and sabzi mandi retailers.

Shaukat Aziz has to sit down with individual associations (chamber of commerce, etc), with ministers and secrataries, and invite economists and consultants, have a meeting(s) with all included, chalk out a plan, and implement it on a war footing basis.