Daily Times

The incumbent government has remained successful in its first constitutional test, as the supplementary budget has been passed for the financial year 2018-19. The government has taken taxation measures worth Rs 183 billion and cut the Public Sector Development Program by Rs 125 billion. The government has claimed that a mini-budget would help in restricting budget deficit to 5.1 percent of the GDP (Rs2 trillion) which otherwise would have gone up to Rs 2.9 trillion (7.2 percent of the GDP). Moreover, it has reinstated the restriction on non-tax filers for the purchase of properties and vehicles. It looks like the basic target of the Asad Umar led financial team is to ensure that excessive expenditure side is controlled. Therefore, the expenditure side of the budget has displayed some significant cuts but nothing new has been done on the revenue side.

The revenue side is again more dependent on the indirect taxes and regulatory duties. The regulatory duties on 150 plus items have been imposed or the existing rates have been increased. Most of these items are imported, but the inflationary pressure is still expected in the coming months. PTI has promised to take steps to widen the tax net by levying direct taxes on those who earn above the tax bracket, and own assets but have never filed tax returns. In these circumstances, it was expected that the new government would come up with drastic and influential regulatory changes in the financial taxation system of the economy. Serious steps should be taken to control tax evasion, but it looks like the basic aim was to achieve minimum  fiscal and monetary stability with the least amount of structural adjustments.

The incumbent government has been elected with the motto of change. And some changes are visible like the austerity campaign, the opening of governor houses etc, but all of these changes are on the political front. These changes can be helpful to achieve political mileages but real change is yet to be seen

As a matter of fact, it’s true that due to the vast economic mismanagement of loans in the past five years, the current government is feeling the heat. The total external debt is around 91 billion dollars and the debt repayment of the previous IMF program is about to start in the coming months. The fiscal pressure is increasing with every passing day.

A tight monetary and fiscal policy is the need of the hour but a lot of work needs to be done in some areas of the economy. In other words, issues like tax evasion and money laundering should be tackled efficiently. Although the incumbent government is in its early days, but still a serious effort needs to be made in this regard. Unfortunately, Pakistan is one of those economies of the world where the tax to GDP ratio is single digit. The revenue side needs to be managed efficiently and quickly.

Another important thing is to get the desired results from CPEC, financial constraints are high and our industry is on the receiving side. Due to the non competitive environment in the last five years, our large and small industries have suffered a lot. In this regard, the current government has done some good things like reducing the gas tariff for the industry in Punjab. These kinds of steps by the government must be appreciated. The trade gap must be reduced on priority bases and this must be one of the premier targets of the government.

The incumbent government has been elected with the motto of change. And some changes are visible like the austerity campaign, the opening of governor houses etc, but all of these changes are on the political front. These changes can be helpful to achieve political mileages but real change is yet to be seen. People are still hopeful and expecting something concurrent in the coming days. It must take some steps and set aside the political fear of a coalition government.

The IMF mission is also in the town. Since their presence, the exchange rate is depreciating. News is circulating that the IMF is suggesting a depreciation of the rupee up to 140 per dollar, high rates of electricity, privatisation of state owned organisations and other hard economic measures. In these circumstances, time is money for the current government. The political front will not remain cool for a long period of time. Imran Khan must remember the fact that, actions speak louder than words.

The writer can be reached at raja_4_92@live.com

Published in Daily Times, October 6^th 2018.