VISIBLY joyous over the successful conclusion of talks with the International Monetary Fund (IMF), which would potentially lead to the release of next tranche of the ongoing package as well as funding for climate change, Prime Minister Shehbaz Sharif has stated that the economic policies of the Government are proving detractors wrong.
Speaking at a meeting of the Federal Cabinet on Wednesday, he said opponents had predicted that a mini-budget would be necessary to secure the deal but it was achieved without the need for additional taxation measures, proving the government’s resolve and planning.
He also highlighted the government’s success in surpassing tax collection targets saying the IMF had aimed for a 10.2% tax-to-GDP ratio, but with strong performance from the economic team, the tax-to-GDP ratio had reached 10.6%, marking the highest achievement in the last four years.
Apart from the appreciation he showered on his economic team as well as Deputy Prime Minister Ishaq Dar and provinces, the speech of the Prime Minister also echoed sentiments of the people when he talked about the hardships faced by the common people who bore the brunt of price hike during the process of achieving economic stability.
Besides, he paid tribute to the salaried persons who contributed a major portion in tax collection paying a colossal Rs331 billion in income tax in just eight months of this fiscal year, higher by Rs120 billion or 56%.
The pro-people posture of the Government was also reflected in the decision of the Cabinet, which did not endorse the new net metering policy as proposed by the Energy Ministry and already approved by the Economic Coordination Committee of the Cabinet (ECC).
The policy received severe backlash as it envisaged reduction of buyback rate of rooftop electricity from Rs.27 to Rs.10 and scrapped net billing.
In a positive move, the cabinet halted the move to impose more taxes on solar consumers and directed a review of the net-metering policy through an expanded process of consultations.
Hopefully, sanity will prevail and a realistic policy will be devised to encourage and not discourage the process of solarisation as it is in the interest of both individual consumers and the Government.
There is also an important development the IMF has officially announced its concurrence to much-talked-about reduction in prices of electricity and the cabinet also approved lowering the prices in proportion to the relief in the prices of petroleum products that the Government did not pass on to consumers for the current fortnight.
According to the Energy Minister, apart from the revision of agreements with about two dozen IPPs, the authorities are also in contact with about seventy others for revision of contracts, which could lead to saving of substantial amounts enabling the Government to pass on the relief to all consumers.
However, the Staff Level Agreement (SLA) with the IMF envisages measures like imposition of carbon levy on all hydrocarbons, including petroleum products and coal and water pricing, which could complicate things for people but these measures are proposed to be implemented in a phased manner.
The Government also acted in haste and withdrew the tax rebate for full-time teachers and researchers, increasing their tax liability significantly.
This decision too was reversed by the Cabinet, which approved an amendment in the relevant law to restore the rebate for both categories.
It is appreciable that the Government did not wait for the next budget to restore this benefit but it is not clear as yet whether the decision will have retrospective effect as the FBR had been pressurizing research and educational institutions to deduct full income tax from researchers and teachers.
Both the Prime Minister and the Finance Minister have all along been talking about tax burden on salaried class and inflationary pressure on the common man and they should be compensated in the next budget.
