Dance
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WASHINGTON: Finance Minister Abdul Hafeez Sheikh has indicated that the government may seek another International Monetary Fund (IMF) programme as a short-term effort to fill the gap between its income and expenses.
A new programme, he said, was also necessary for debt servicing as Pakistan will soon have to start repaying a previous loan it borrowed from the IMF.
The finance minister said that the government was trying to bring budget deficit down to 4.5 of the country`s gross domestic product. We understand that to achieve this target we will have to raise taxes and curtail expenses and were are willing to do both, he said.
Pakistan negotiated a bailout package with the IMF in November 2008, with a pledge to implement reforms suggested by the Fund.
The $11.3 billion emergency loan package helped Pakistan avert a balance of payments crisis and shore up reserves.
The country received the fifth tranche of this loan n in May 2010. Pakistan and IMF authorities are scheduled to meet before June 30 to discuss the release of the sixth tranche. Negotiations for a new arrangement, however, will test the finance minister`s negotiation skills.
Last week, the IMF complained that Pakistan`s truncated reforms were late and limited in scope. It also complained that Pakistan had made very little progress in reforming the energy sector and in commodity operations.
Earlier this week, the Asian Development Bank warned week that Pakistan`s budget deficit may exceed the government`s target this year because of higher spending, including the cost of fighting militants in tribal areas.
Pakistan revised its fiscal deficit target for the year ending June 30 to 5.5 per cent from 4 per cent because of higher food and energy costs, escalating subsidies and reducing tax revenue. But the ADB said that even that was an unrealistic target.
The country`s economic growth may come down to 2.5 per cent this year from 4.5 per cent in the previous fiscal year as monsoon flooding destroyed homes and crops and power shortages hampered industrial growth.
In a two-and-half hours brain-storming session with the IMF and World Bank staff, Dr Sheikh and other members of his team explained various long-term objectives of the government and also highlighted the country`s broad economic trends.
Dr Sheikh said that recently the government investigated some 4,000 commercial firms who were not paying taxes and referred their cases to the court. We are under pressure to withdraw those cases but we will not, he said.
The finance minister acknowledged that the current parliament was resisting tax reforms.
You have to look at the composition of the National Assembly, he said. For us to make proposals is one thing to convince a coalition government is another.
Responding to a question, Dr Sheikh said he realised that the country cannot depend on foreign aid for attaining economic stability.
We want trade. We want preferential access to western markets. That is our priority, he said. We do not want to become dependent on aid.
He emphasised the need to promote trade with India and other South Asian countries and said that it was one of our top priorities.
Without referring to the country`s military expenditure, the finance minister said that Pakistan had been in a state of perpetual conflict and wars, which forced it to focus on its security needs.
He stressed the need for a smooth political transition and policy continuity.
You cannot redo your policies every time you have a new government, he said, adding that the current government was formulating policies that could be pursued by future rulers as well.
Parliament resisting tax reforms: Hafeez | Newspaper | DAWN.COM
A new programme, he said, was also necessary for debt servicing as Pakistan will soon have to start repaying a previous loan it borrowed from the IMF.
The finance minister said that the government was trying to bring budget deficit down to 4.5 of the country`s gross domestic product. We understand that to achieve this target we will have to raise taxes and curtail expenses and were are willing to do both, he said.
Pakistan negotiated a bailout package with the IMF in November 2008, with a pledge to implement reforms suggested by the Fund.
The $11.3 billion emergency loan package helped Pakistan avert a balance of payments crisis and shore up reserves.
The country received the fifth tranche of this loan n in May 2010. Pakistan and IMF authorities are scheduled to meet before June 30 to discuss the release of the sixth tranche. Negotiations for a new arrangement, however, will test the finance minister`s negotiation skills.
Last week, the IMF complained that Pakistan`s truncated reforms were late and limited in scope. It also complained that Pakistan had made very little progress in reforming the energy sector and in commodity operations.
Earlier this week, the Asian Development Bank warned week that Pakistan`s budget deficit may exceed the government`s target this year because of higher spending, including the cost of fighting militants in tribal areas.
Pakistan revised its fiscal deficit target for the year ending June 30 to 5.5 per cent from 4 per cent because of higher food and energy costs, escalating subsidies and reducing tax revenue. But the ADB said that even that was an unrealistic target.
The country`s economic growth may come down to 2.5 per cent this year from 4.5 per cent in the previous fiscal year as monsoon flooding destroyed homes and crops and power shortages hampered industrial growth.
In a two-and-half hours brain-storming session with the IMF and World Bank staff, Dr Sheikh and other members of his team explained various long-term objectives of the government and also highlighted the country`s broad economic trends.
Dr Sheikh said that recently the government investigated some 4,000 commercial firms who were not paying taxes and referred their cases to the court. We are under pressure to withdraw those cases but we will not, he said.
The finance minister acknowledged that the current parliament was resisting tax reforms.
You have to look at the composition of the National Assembly, he said. For us to make proposals is one thing to convince a coalition government is another.
Responding to a question, Dr Sheikh said he realised that the country cannot depend on foreign aid for attaining economic stability.
We want trade. We want preferential access to western markets. That is our priority, he said. We do not want to become dependent on aid.
He emphasised the need to promote trade with India and other South Asian countries and said that it was one of our top priorities.
Without referring to the country`s military expenditure, the finance minister said that Pakistan had been in a state of perpetual conflict and wars, which forced it to focus on its security needs.
He stressed the need for a smooth political transition and policy continuity.
You cannot redo your policies every time you have a new government, he said, adding that the current government was formulating policies that could be pursued by future rulers as well.
Parliament resisting tax reforms: Hafeez | Newspaper | DAWN.COM
