Observer replied on Monday, October 17, 2016 11:55 AM PST
Updated Oct 15, 2016 10:56am
Govt taking steps to limit deficit to 3.8pc, IMF assured
KHALEEQ KIANI
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ISLAMABAD: With revenue slippages in the first quarter of this fiscal year, the government has pledged to cut current and capital expenditures and take ‘additional measures’ to recoup revenue shortfalls and limit fiscal deficit within committed 3.8 per cent of GDP.
The undertaking has been given to the International Monetary Fund (IMF) that would continue to have closer monitoring of Pakistan’s economic and fiscal policies until its full loan repayments. The authorities are believed to have missed the first quarter (July-September) revenue target by over Rs100 billion.
In consultation with the IMF, the government had set a fiscal deficit limit of 3.8pc of GDP, excluding foreign grants for 2016-17 and including a 0.3pc of GDP (more than Rs100bn) for security and resettlement of internally displaced persons. Pakistan will remain under post-programme monitoring (PPM) because it availed more than 200pc of its quota in loans from the IMF.
“Against the backdrop of slower growth in the collection of the Gas Infrastructure Development Cess (GIDC) and federal non-tax revenue, we will manage budgetary spending very prudently and reduce non-critical current and capital expenditures as necessary to achieve our fiscal deficit target. In case of any further deviation, we would take additional measures in order to achieve our revenue and budget deficit targets,” Finance Minister Ishaq Dar committed in writing to the IMF.
He said the government would continue a steady pace of fiscal consolidation to further strengthen public finances and improve debt sustainability. The fiscal policy strategy would continue to aim to bring the budget deficit to a sustainable level through revenue mobilisation and expenditure rationalisation to rebuild fiscal buffers against shocks, put the debt-to-GDP ratio on a downward path, and increase growth-enhancing and poverty-alleviating expenditures.
The minister said the energy subsidies had been reduced by about 1pc to 0.6pc of GDP over the three-year period that would be further curtailed to 0.4pc. “We will lower energy subsidies to 0.4pc of GDP and continue to rationalise current expenditures across all layers of the general government, while continuing to increase targeted social assistance in real terms and further improving the share of development spending,” the minister said.
At the same time, Mr Dar also assured the fund of strengthening inter-governmental fiscal policy coordination to ensure the sustainability of public finances. Given the extent of devolution in revenue and expenditure assignments, strengthening fiscal policy coordination (FCC) across all layers of the government would be continued through quarterly meetings of the FCC committee of federal and provincial finance secretaries.
The government also told the government to seek an agreement with provinces to balance devolution of revenue and expenditure responsibilities in a way that allows for internalising the objectives of macroeconomic stability and fiscal sustainability across all layers of the general government.
“To this end, we are encouraging provincial governments to enhance their own revenue mobilisation by bringing underdeveloped tax bases such as agriculture, services, and property, more effectively into the tax net and improve taxpayer compliance with a particular focus on identifying misdeclarations in agricultural income,” the finance minister said.
“Despite the progress, the full potential of the tax system has still to be realised and requires to generate additional resources… we will refrain from granting concessions, exemptions and any form of amnesty, enhance tax policy measures, and accelerate administrative reforms aimed at broadening the tax base and modernising our tax system,” he said.
Published in Dawn, October 15th, 2016 |