ISLAMABAD - The government has launched a medium term plan for economic stability and growth envisaging an ambitious target of taking the country’s GDP growth to 15 years highest level and increase exports to $40 billion by 2022-23.

“The crisis stage of the economy has passed and now we have entered into economic stabilisation phase,” Finance Minister Asad Umar said on Monday at launching ceremony of ‘Roadmap for Stability Growth and Productive Employment’.

The minister said that incumbent government had inherited a very sick patient that had been taken to the ICU [Intensive Care Unit]. The government therefore had to take emergency measures.

He said that stabilisation process would take one and half year, which would be followed by sustainable growth in later stage.

Asad Umar informed that government has prepared the medium term framework to address three keys issues of the economy including budget deficit, current account deficit and gap between saving and investment rates.

These three chronic economic issues were the same when he was attending college 40 years ago, he said.

Govt aims high GDP, $40b exports by 2022-23

Exchange rate is not a measure of a strong economy,” minister says in reference to sharp depreciation of rupee value

The minister said that numbers of economic indicators were not included in the released framework draft, which would be shared after finalisation of IMF programme. The draft has also been shared with parliamentary standing committees for taking their input.

The medium term economic plan would help in increasing the GDP to the highest level in 15 years in 2022-23, the last year of PTI government’s five years tenure. The exports would increase to $40 billion by then from the existing $23 billion.

Similarly, he said, budget deficit would be reduced to a sustainable level and state-owned public sector entities would either be improved or privatised.

Debt to GDP would be reduced to below 70 percent by 2022-23. Similarly, employment opportunities would increase and inflation would be brought under control, the finance minister said.

Asad Umar informed that talks between Pakistan and the International Monetary Fund (IMF) are in final stage. He vowed that this would be the last IMF package for Pakistan.

 

 

Currency value

“The exchange rate is not a measure of a strong economy. At one point, the Pakistani rupee was stronger than the Japanese yen, even though the latter’s per capita income was much higher than ours,” Asad asserted.

He criticised the PML-N government for maintain artificial value of currency in their tenure. The last governments had ruined the economy by artificially maintaining the exchange rate, as even their two finance ministers Ishaq Dar and Miftah Ismail were not on same page regarding currency devaluation.

“In order to end the practice [of artificially maintaining the exchange rate], economic fundamentals need to be strengthened,” he explained. He criticised the artificially maintained exchange rate by saying it harm our farmers and exporters and give a free subsidy to the foreign traders.

Problems and remedies

Asad Umar said that Pakistan was exporting less compared to the requirement of foreign exchange. Similarly, the government was paying Rs800 billion on interest payments for debts, he said, and also emphasised on the need to reduce the expenditures of the country to control the budget deficit.

The government would bring the financial discipline. It would abolish the supplementary grants from next fiscal year, as only parliament would approve the supplementary grants if needed. Similarly, a new law of Public Finance Management will be introduced in the budget, he added.

He regretted that saving rate of the country is very low in the whole region. He said saving culture will be promoted to increase investment and economic development.

Umar said that government had announced incentives for exporters to address their issues including reducing power and gas tariffs, issuing sales tax refunds through bonds. He also said that government is taking measures to improve the ranking of ease of doing business.

“We have also announced Agriculture productivity plan, which would help in increasing the agriculture sector growth”. In last 20-25 years, the agriculture sector was neglected, which had resulted in lesser exports and higher current account deficit.

The finance minister said trade will be promoted in the region to fasten the pace of economic development. He said China-Pakistan Economic Corridor (CPEC) will integrate the region and increase connectivity. He highlighted the importance of regional trade, terming it one of the ways to “become a part of the world economy”.

He regretted that the past governments did not develop the Islamic banking sector even though a significant portion of the Pakistani public preferred it over conventional banking.

Asad said that, instead of taking easy decisions influenced by “the news cycle or elections”, the PTI government wanted to strengthen the economy by devising policies that will strengthen the economy in the long term.

 

 

 

 

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Fixing tax collection system

The minister criticised the Federal Board of Revenue (FBR) for complex procedure for filing taxes. “The amount of questions FBR asks you for your returns is more than those asked when you are accepting a marriage proposal for your daughter,” he said.

The government, he said, would simplify the procedure for filing tax returns in the upcoming budget for next fiscal year 2019-20.

“Instructions in Urdu will be available on the website. They will not be hidden in some drawer. We have to create transparency.”

The minister said enforcement capacity of the FBR will be increased to bring more and more people into tax net. The system of FBR is being linked with Nadra for easier exchange of information.

“Revenue will only increase when the economy develops,” he said and announced that the government had decided to form a separate tax policy unit with experts on board.

The finance minister asked the tax evaders to declare their assets in the upcoming tax amnesty scheme otherwise the government would take action against them through available information.

“There should be no doubt that the scheme will be successful when people would know that they won’t be able to hide when it expires.”

He informed that FBR capacity to reach those who are not paying the right taxes has drastically improved as the government had collected information within and outside the country against non-taxpayers.