ISLAMABAD: The federal government is working on a smaller budget that includes some drastic measures like imposing a “flood levy” and increasing duty on petroleum products.
The “economic roadmap” was shared with the National Security Committee (NSC) on Monday as the body took “major decisions” to revive the economy and provide relief to the people.
The NSC, which held two sessions on Friday and Monday to consider the country’s economic and security situation, stressed that comprehensive “national security” revolves around economic security and sovereignty and economic independence. Without autonomy or dignity comes under pressure.
The forum took a comprehensive look at the ongoing economic situation regarding the challenges faced by the common people of Pakistan, especially the low and middle income groups.
Finance Minister Ishaq Dar briefed the NSC about the government’s economic stabilization roadmap, including the status of discussions with international financial institutions, exploring other financing avenues based on mutual interests, as well as relief for the common man. Steps are included.
In a separate statement on Monday, Prime Minister Shehbaz Sharif said that the NSC took some major decisions after hours of deliberation.
“Two of them stand out: The state of Pakistan will adopt a policy of zero tolerance for terrorists challenging its writ. There is no negotiation on peace. Two, the economic roadmap will restore the economy and provide relief to the people. will provide.”
NSC took some major decisions yesterday after hours-long deliberations. Two of them stand out: State of Pakistan will adopt zero tolerance policy for terrorists challenging its writ. Peace is non-negotiable. Two, economic roadmap will revive economy & provide relief to the people
— Shehbaz Sharif (@CMShehbaz) January 3, 2023
Mini budget
Meanwhile, sources confirmed to JEE News that during the NSC meeting, it was decided to slap the “flood levy” in the range of 1 to 3% through the implementation of a Presidential Ordinance and to unveil the mini-budget. A proposal was solidified.
The proposal is expected to be finalized within this week.
The committee approved the rationalization of imports and now the government has decided to impose a flood levy in the range of 1 to 3 percent to reduce imports and raise Rs 60 billion in the second half (January-June) period of the current financial year. is ready.
According to the publication, the finance minister will approve the mini-budget proposals in the next two to three days, after which a presidential ordinance will be issued.
“An important meeting is expected on Tuesday (today) to finalize proposals for the upcoming mini-budget,” a senior official said on condition of anonymity.
So far, no other proposals have been finalised, mainly because the government is in a Catch-22 situation, as it is quite difficult for policymakers to impose additional taxes at a time when the country is facing stagnation.
Inflation on a CPI basis remained above 25 percent, while real GDP growth was expected to decline from 5 percent to less than 2 percent for the current fiscal year.
Reduction in tax collection
The Federal Board of Revenue (FBR) faced a shortfall of Rs 225 billion to achieve the desired target for December 2022, as tax collections stood at Rs 740 billion against the set target of Rs 965 billion.
The authorities had set an annual tax collection target of Rs 7470 billion but after Rs 225 billion it will be difficult to get close to the desired annual tax collection target.
The Federal Government prefers to impose flood levy primarily because it will not form part of the Federal Distributed Pool (FDP) under the National Finance Commission (NFC) award. Therefore, if the government proceeds on this front, the additional revenue collected through the flood levy will not be distributed to the provinces.
Government officials argued that they have asked the FBR to step up efforts to meet the desired tax collection target at all costs.
Top FBR officials said tax cases worth Rs 250 billion are pending before the apex court and they have informed the IMF that they will be able to collect the tax due by March 2023.
He said that the IMF was requested to freeze tax collection without revising the annual tax collection target of Rs 7,470 billion till June 30, 2023.
The FBR has also been tasked with identifying the sectors that have generated high profits in the last financial year and two such sectors are banking and beverages.
It remains to be seen how the government decides to proceed to recover additional tax and non-tax revenue in the remaining period of the current financial year.
Petroleum Levy
The government also faces a huge task of getting the PDL up to Rs 855 billion and its downward revision is also on the cards.
The government increased the levy on MS petrol to Rs 50 per liter and on diesel to Rs 32.50 per litre.
It was also discussed in the meeting that the petroleum levy will be around Rs 70 to Rs 100 per liter and will be based on petrol, gas and electricity price and cost+ basis.
Targeted subsidy
The NSC discussed that no subsidy would be given except to the weak and the most affected.
It was also discussed that the transfer of funds to the provinces would be linked to the losses of electricity and gas in the provinces. The issue of current account deficit was also highlighted and emphasis was placed on dollar-rupee parity based on market rates.
It was also discussed that the fiscal deficit would be met by allocating a certain percentage of GDP for its financing.
IMF program
The forum also raised the issue of a 10-year comprehensive plan on structural support to Pakistan from China, UAE, KSA, Qatar, European Union and the United States.
JEE News has learned that after the implementation of these proposals, all obstacles to the recovery of the IMF program will be removed and the loan will be restored in March.
