Daily Times

The ministry of finance and revenue has estimated tax collection to reach Rs5.83 trillion during the current fiscal year 2021-22 (FY22).

In its monthly Economic Update and Outlook for August 2021, the ministry said that in FY2021, tax revenue increased by 18.4 percent, whereas in July FY2022, tax collection climbed up by 42.5 percent, indicating a good start to the new fiscal year. For FY2022, the tax collection is expected to reach Rs5.83 trillion.

“To achieve the target, the government is pursuing a comprehensive tax policy that focuses on expanding the tax base by identifying new taxpayers, gradually eliminating exemptions and concessionary provisions, along with lowering tax rates,” it said.

It said that during FY21, the fiscal consolidation efforts remained on track. For FY2022, the fiscal deficit is expected to reduce further. According to the ministry, the persistence in consolidation efforts would pave the way to create fiscal space that would enable the government to withstand any untoward situation. The Monthly Economic Indicator (MEI) is based on combining monthly data of indicators that are proven to be correlated with GDP at constant prices. In July 2021, the MEI showed continued strong growth, mainly driven by several factors. First, an expected continued strong YoY growth of large-scale manufacturing (LSM) in July. Furthermore, as observed in July continued cyclical uptrend in the main trading partners, continued strong growth in imports and deceleration of inflation. According to Balance of Payments (BoP) data, imports of goods and services spiked in June 2021, but returned to normal level in July 2021. Usually, both June and July, but especially June, are characterised by positive seasonal effects. This positive seasonal impulse is expected to disappear in August.

On the other hand, other factors, such as the recent increases in international oil prices and the ongoing revival of economic growth, may stimulate imports. It is expected that imports of goods and services will settle at around $6 billion in August 2021. Contrary to imports, exports of goods and services, according to Pakistan Bureau of Statistics data, usually experience negative seasonality during June through September.

The moderation of this seasonal effect, together with the ongoing strong recovery in Pakistan’s main export markets, the momentum in domestic economic dynamism and specific government policies to stimulate exports are expected to guide exports of goods and services towards the $3 billion in August and beyond in subsequent months.

It is expected that trade deficit in goods and services could stabilise to approximately $3 billion in August with expectations about remittances to be stabilised around $2.5 billion and taking into account the other secondary income and primary income flows, the current account would remain in deficit at moderate monthly levels of around $0.5 billion in the coming month. These expectations depend on the absence of any unexpected negative shocks which may be generated by the potential slowdown of the economic revival abroad (due to loss of confidence, inflation fears, uncertainty for tapering of monetary accommodation and geopolitical risks, etc.). An international and domestic upsurge in Covid-19 infections remains an important risk factor.

The finance ministry said that recent developments in Pakistan’s macroeconomic indicators are positive. In absence of any major unexpected negative shocks, the economy is moving on a balanced and sustainable growth path.