FINANCE Minister Muhammad Aurangzeb said Wednesday he aims to establish enduring macroeconomic stability in Pakistan which is poised to transition into sustainable growth amid the country’s fiscal challenges. In an interview, he said the first quarter of 2024 was better than the first quarter of 2023, GDP was better, there is macroeconomic stability, exchange rate is stable and now we will have to make this stability permanent.
The assessment of the prevailing situation and his plans to tackle the economic and financial malaise give clear indication that the new Minister was quite serious about putting the economy back on track. His proposals to reduce the leakages in revenue and cut expenditure in the Public Sector Development Programme (PSDP) through public-private partnership can prove to be steps in the right direction as these also imply there might not be more burden on the honest tax-payers and no downsizing of the PSDP as has repeatedly been done by the successive governments as part of the exercise to save expenditure. We have been emphasizing in these columns that the PSDP is an important tool to trigger economic activities and create employment opportunities. However, there was definitely a need to ensure that development projects are envisaged, launched and executed purely on merit with the objective of providing relief or facilities to the people and their ability to save recurring expenditure or improving capacity of the country to pay back the national debt. In this background, the decision of the Federal Government to stop including or funding new provincial projects in its PSDP becomes understandable as provinces are in a better position to take care of their own projects and programmes in view of increased flow of resources after the 18th amendment in the Constitution. As per the decision, provincial projects will not be funded whereas those already in the implementation stage will be completed. However, in exceptional cases like for least developed districts and regions, the federal government may fund some projects. According to reports, the federal government would not provide money for higher education, which is a provincial subject and from next fiscal year will no longer fund subsidies on fertilizer and electricity for tube-wells as these functions also fall in the provinces’ domain. For plugging tax leakages, the new Minister has expressed determination to go for end-to-end digitization of the Federal Board of Revenue (FBR) and documentation of the economy. The FBR has been working on digitization of its working and processes but there was a need to go for a wholesome approach to plug leakages in different sectors. Similarly, some steps have also been taken for documentation of the economy but the business community is strongly resisting all efforts aimed at complete documentation which has the potential to increase the tax collection significantly. The Minister rightly believes by leveraging technology and enhancing transparency, the country can build a more equitable tax system that fosters economic growth and benefits all citizens. It is to be seen what strategy the Minister adopts to overcome the stiff opposition of the business community, which has been pressurizing successive governments to get incentives and relief but resists measures aimed at transparency and documentation. It may be pointed out that in a majority of cases, manufacturers and service-providers add taxes to their goods and services but either do not deposit this tax altogether or pay less. This is sheer tax theft and there should be zero tolerance for culprits. Aurangzeb has new ideas for expanding revenue and this was highlighted when he said successive governments didn’t tap China’s bond market, hoping that Pakistan would enter it in the ongoing year. Ahead of the second and final review of the IMF’s $3 billion Standby Agreement (SBA), he said that Pakistan is in a good position in terms of fulfilling prerequisites but the real issue is adaptation of the IMF programme in line with the ground realities. So far Pakistan has passively accepted all prescriptions proposed by the Fund whereas the logic demands the programme should be homegrown and not imposed from outside. There is also ongoing discussion on the need to streamline wage and pension bills but any solution must keep in mind the plight of the government employees and pensioners in the face of back-breaking inflation.
