ISLAMABAD - Adviser to Prime Minister on Finance Abdul Hafeez Shaikh on Thursday said that loan programme approved by International Monetary Fund (IMF) will pave way for other international lenders to release additional funds for Pakistan.

"We will take difficult decisions [due to the tight fiscal situation]," Hafeez Shaikh however warned. But he assured that government would take measures to protect the vulnerable segments of society.

The finance adviser was addressing a press conference along with Minister of State for Revenue Hammad Azhar and Federal Board of Revenue (FBR) Chairman Shabbar Zaidi.

He informed that IMF has given loan at low interest rate, which is below three percent, while its payback period under the Extended Fund Facility (EFF) is ten years.

Hafeez said Pakistan would receive the first tranche of $1 billion by July 8, 2019. The country would receive $2 billion dollars each year in three years programme, he added.

The debt 'trap'

To a question about IMF assessment that Pakistan would need $38 billion in the coming years to meet its large financing needs, Hafeez Sheikh said the government would borrow $8.7 billion as project loan, $4.2 billion as programme loan (which would be used as budgetary support), $14 billion as rollover and $8 billion as commercial loans.

Shaikh said Pakistan by entering into an agreement with the IMF had sent a message to the world that its government will exhibit responsibility in controlling its expenditures and will mobilise taxes from its wealthy classes. This would encourage other international financial institutions to release funds to Pakistan.

He said the Asian Development Bank had already agreed to provide additional funds of $3.4 billion to Pakistan and $2.1 billion would be released this fiscal year. Similarly, he said World Bank would also give additional funds to Pakistan. All these funds will be used for budgetary support, he added.

The adviser said that incumbent government had inherited a huge loan of Rs31,000 billion. The government approached friendly countries including China, Saudi Arabia, United Arab Emirates and Qatar for taking funds to repay the previous loans. Pakistan had also availed defer oil payment facilities from Saudi Arabia and Islamic Development Bank.

 

 

Corrective measures

Hafeez Sheikh said the government had reduced its expenditures by Rs50 billion. Similarly, the armed forces had frozen their budget, which is decease in real terms. The government had also announced measures to reduce the soaring imports and increasing exports of the country, he added.

He said that currently the circular debt is Rs 38 billion per month that would be reduced to Rs26 billion in June 2019 and Rs8 billion in June 2020. There would be zero circular debt by December end 2020, the adviser stated. The government would share its plan for privatization of Public Sector Entities with IMF by September 2020.

To minimise impact of tough decisions on the vulnerable segments of society, he said, the government had doubled the budget for Ehsas programme, allocating Rs191 billion from Rs100 billion. The government had also allocated massive amount for giving subsidy to electricity consumers using less than 300 units in a month.

 

 

Amnesty scheme and Benami assets

Talking about the recent tax amnesty scheme, Hafeez Shaikh said that around 1,37,000 people have availed the Assets Deceleration Scheme, which is highest ever number of declarations in any scheme in country’s history. Around, 100,000 out of these 137,000 are the new taxpayers, he added.

The FBR has generated Rs70 billion revenues through the scheme. People have declared about Rs3,000 billion worth of assets under the programme.

The adviser said that government would now work on bringing reforms in FBR to achieve the tax collection target of Rs5.55 trillion in ongoing fiscal year.

Speaking on the occasion, Minister of State for Revenue Hammad Azhar said that government would implement the law indiscriminately in cases against Benami properties.

FBR Chairman Shabbar Zaidi said that FBR had received the data of non-filers from the State Bank of Pakistan and power distribution companies. The FBR is asking the industrial consumers to file their tax returns immediately to come into tax net. “I have asked the FBR’s officials not to harass the people,” he added.