ISLAMABAD: Finance Minister Shaukat Tarin is unveiling the Pakistan Economic Survey 2020-21 at a press conference in Islamabad and initiated the press conference by appraising Prime Minister Imran Khan’s policies in combating the coronavirus pandemic and the production of rapid vaccines to curb the deadly virus. The Pakistan Economic Survey is an annual report on the performance of the economy, focusing in particular on major macroeconomic indicators. Tarin started out by highlighting the devastating impact of Covid-19 in contracting the economy and how the third wave had resulted in mass unemployment. But, he said, the decisions of this government helped the economy stabilise which resulted in improving performance on the growth front. “The government itself had set [GDP] growth will be 2.1pc and the IMF predicted even lower. But the decisions by this government such as incentivising manufacturing and textiles, construction, gas and electricity and interventions in agriculture have helped the economy recover.” Pakistan has recorded a provisional growth rate of 3.94pc in the first 9 months (July to March) of the fiscal year. Tarin said large-scale manufacturing (LSM) showed growth of 9pc, while the agriculture sector growth clocked in at 2.77pc despite the “cotton crop getting ruined”. The finance minister said the government wanted to control inflation “but prices are still high and affecting the common man”. Fiscal Deficit According to the consolidated fiscal operations, the fiscal deficit during the first nine months of FY2021 contained at 3.5 percent of GDP against 4.1 percent of GDP in the comparable period of FY2020. Similarly, the primary balance posted a surplus of Rs 451.8 billion (0.9 percent of GDP) during July-March in FY2021 against the surplus of Rs 193.5 billion (0.5 percent of GDP) in the same period of FY2020. Total revenue grew by 6.5 percent in FY2021 against a growth of 30.9 percent in the same period of last year. In absolute terms, total revenue increased to Rs 4,992.6 billion during July-March, FY2021from Rs 4,689.9 billion in the same period of FY2020. A major impetus in revenue increase came entirely from double-digit growth in tax revenue which compensated for the decline in non-tax revenues. Total tax revenue (federal & provincial) grew by 11.9 percent during July-March, FY2021 and stood at Rs 3,765.0 billion against Rs 3,365.5 billion in the comparable period of FY2019. Within the total, federal tax collection witnessed a significant rise as it grew by 11.5 percent to stand at Rs 3,394.9 billion during July-March, FY2021 against Rs 3,044.3 billion in the same period of FY2020. In contrast, the non-tax revenue fell sharply during July-March, FY2021 after witnessing strong growth in the same period of last year. Non-tax revenue, stood at Rs 1,227.6 billion during July-March, FY2021 against Rs 1,324.4 billion in the corresponding period last year, showing a decline of 7.3 percent. Out of the total, federal non-tax revenue recorded a decline of 8.0 percent to Rs 1,145.4 billion during July-March, FY2021 against Rs 1,244.8 billion in the same period last year. The decline is mainly attributed to the absence of a one-off renewal fee for GSM licenses from telecommunication companies. In addition, lower receipts from a surplus profit of SBP and mark-up (PSEs & others) have also attributed to an overall decline in federal non-tax collection. On the other hand, receipts from Gas Infrastructure Development Cess (GIDC), Natural Gas Development Surcharge and petroleum Levy have witnessed an increase during July-March, FY2021 over the same period last year. The breakup shows that out of the total, Rs 497.5 billion were collected from SBP profit followed by Rs 369.2 billion from petroleum levy, Rs 53.3 billion from Royalties on Oil/Gas, Rs 53.2 billion from mark-up receipts (PSEs & others), Rs 20.0 billion from PTA profit, Rs 17.2 billion from natural gas development surcharge and Rs 15.4 billion from GIDC etc. On the expenditure side, total expenditure grew by 4.2 percent during July-March, FY2021 as compared to 15.8 percent growth observed in the same period of FY2020. The efficient expenditure management helped in curtailing the overall expenditure during the current fiscal year. In absolute terms, the expenditures stood at Rs 6,644.6 billion (13.9 percent of GDP) during July-March, FY2021 against Rs 6,376.0 billion (15.3 percent of GDP) in the comparable period of last year. The current expenditure contained at 8.4 percent during July-March, FY2021 against 16.9 percent growth recorded in the same period of last year. In absolute terms, it stood at Rs 6,085.4 billion in July-March, FY2021 against Rs 5,611.6 billion in the same period of FY2020. Although higher mark-up payments, increase in subsidies and grants to others, contributed significantly to the current fiscal year’s growth in current expenditure, the decline in other expenditures like defense, pensions and running of civil government slowed the pace of growth. Record Remittances He said remittances received broke records at $2.5 billion and will surpass a total of $29 billion in total in the future. This brought on a positive trend in the current account despite growing imports of wheat, pulses, ghee and sugar. “Overseas Pakistanis have a special relationship with Prime Minister Imran Khan,” said Tarin. He said $1 billion has been deposited in the Roshan digital accounts. Focus on growth Tarin said he had told the prime minister it was time to focus on sustainable growth “until we go to 5-8 percent GDP growth”. “We will do interventions and take care of the poor. The poor man has been crushed in this stabilisation phase because the dreams we have shown them have been of a trickledown economy. And this can only happen when growth is sustainable and continuous for 20-30 years,” he said. Tarin, however, emphasised that this growth should not be based on borrowing. From Exporter to Importer “We were net exporter of food but now, we have become a net importer,” he said. “Our exports registered a growth but our remittances increased manifold,” he added He said international prices have had significant effect on the prices of imports such as on the price of sugar that increased by 20% while palm olive prices grew by 20%, vegetable oil by 96%, crude oil by 32% while rest was absorbed. Nominal rise in debt The finance minister said Pakistan’s total debt had increased nominally in the last 9 months. He said Pakistan’s total debt increased Rs1.67 trillion in FY21 to reach Rs38 trillion. “Out of this Rs25 trillion is local debt while around Rs12.5 trillion is foreign debt.” “I’m not saying it’s a commendable thing that our debt is growing,” he said. “I am not saying that. But you can see stability [in the economy] return slowly,” he added. He said both mobile phones and broadband subscribers have immensely increased in Pakistan at 182 million and 100 million respectively, adding that it showed market penetration of 48% of these services. On Poverty Tarin spoke highly of the Ehsaas programme, adding that the World Bank had described it as “one of the best and the largest” poverty alleviation initiatives across the globe. “Full credit goes to Sania Nishtar,” he said, adding that handing out cash to 15 million people was not a small achievement. He also praised the Kamyab Jawan Programme that was a successful one as well. In addition, he spoke about his discussion with the PM of targeting growth rather than stability. He said the common man was struggling in Pakistan since commercial banks did not cater to their economic needs and provide loans to them. “In this growth, the poor will be ‘number one’ for us, and this growth will trickle down to them,” he said. Tarin said Turkey, China and India were nations who underwent sustainable economic growth over the past 20-30 years and shifted from one orbit to another. He questioned, “When did we grow? We only focus on credit based growth by borrowing.” The government would focus on the bottom up approach to help the poor man in Pakistan, as well as providing a support to Small and Medium Enterprises (SMEs) by providing loans. “India, in 2010, earned $1bn through IT exports. Today, they are earning $100bn through them. If they can grow 100 times, can’t we grow our IT industry by 40 or 50 times?” he asked. Energy Challenges Speaking about the energy challenges, Tarin said Pakistan’s economy was burdened due to the overcapacity in the power sector, saying that “it was a very big challenge and a black hole” for Pakistan. “We have to continue to make capacity payments as a result of overbuilding,” he said, adding that even if Pakistan continued to grow at 4,5 or 6% in the next couple of years, the extent to which Pakistan had overbuilt, it is not possible for the country to utilise that capacity. Tarin said the government will not resort to increasing tariff time and again, saying that it will have a cascading effect on inflation. “Indirectly, even the poor will be burdened with inflation over it,” he said, adding that the government will take 7-8 years to eliminate circular debt. Pakistan is trying to improve the performance of these DISCOs and sell them at a profit to private enterprises. CPEC Tarin admitted that it was the government’s failure that it had been unable to bring investors for its Special Economic Zones (SEZs) via CPEC. The finance minister said China was outsourcing 85mn jobs and Pakistan should avail this opportunity to earn dollars. “We also want to earn dollars as well to repay off loans,” he said. Pakistan IMF Deadlock In response to a question, Tarin said Pakistan’s negotiations with the IMF were ongoing, adding that the international money lender had asked the government to hike tariffs and increase taxes. The finance minister said both parties want the same thing; sustainable growth, adding that the country cannot afford to increase taxes or hike tariffs so that the poor and the salaried class do not feel additional burden of inflation. “This is a red line for the prime minister,” he said. “We will not further burden the poor,” he added. On Taxation Answering another question on taxation, Tarin said developed countries such as China, Turkey and others had increased indirect taxation over the next couple of years. Speaking about the FBR, Tarin said he would end the practice of people being harassed by the bureau. “FBR will not audit [businesses or persons] but a third-party audit will be conducted,” he said. Once the third-party conducts its audit and finds a party guilty, that individual will be thrown into jail. Tarin said he will be able to pull it off as he had played a key role in privatising large commercial banks across Pakistan, successfully, hence he believed it was possible to pull it off.