ISLAMABAD-Adviser on Finance Hafeez Sheikh has said the budget for next fiscal year is focused to cope with the impacts of Covid-19 and provide relief to the masses.
He was addressing post budget news conference in Islamabad today [Saturday] along with Information Minister Shibli Faraz and Minister for Industries and Production Hammad Azhar.
The Adviser said the basic pillar of the budget is that no new tax has been imposed in it rather concessions worth forty to fifty billion rupees have been given in taxes and duties to support the industrial sector and create job opportunities.
Hafeez Sheikh said the government has taken the difficult decisions of cutting its own expenditures keeping in view the problems faced by the masses. He said the development outlay has been set at 650 billion rupees while allocations for Ehsaas Program have been enhanced to protect the vulnerable segments of the society.
The Adviser clarified that present government is taking loans to clear the loans taken in the past. He said we paid back 2700 billion of loans last year and this year we will pay back 2900 billion rupees in loans.
Giving a breakup of the relief given in taxes, the Adviser on Finance said regulatory duty on 1623 tariff lines of raw materials are totally being done away whilst on others including those related to engineering sector are also being reduced.
The Adviser said ten different types of withholding tax are also being abolished.
Hafeez Sheikh said massive relief has also been given to different sectors especially the construction. The Capital Gains Tax is being halved whilst the fedeal excise duty on cement has been cut.
The Adviser said the sales tax for the retailers opting to link themselves with the FBR is being reduced to twelve percent. The duty on hospitality sector is being reduced from 1.5 percent to 0.5 percent. He said taxes and duties are being abolished on the testing kits of corona virus and cancer.
Hafeez Sheikh said the government also tried its level best to pass on the benefit of lowering petroleum prices to the people.
The Adviser said the world institutions including the IMF, World Bank and Asian Development Bank are appreciative of the financial discipline shown by the present government.
The Adviser said that the country had achieved economic stability in the first nine months of outgoing fiscal year. However, the breakout of Corona Virus has adversely affected the economy and inflicted loss of three trillion rupees to the GDP.
Highlighting the achievements on the economic front in the first nine months, the Adviser said it is one of the major achievements of the government that it did not make any borrowings from the Central Bank. Whilst cutting our expenditures we did not give any supplementary grants. As a result our primary balance remained surplus.
He said the tax collection also witnessed a growth of seventeen percent in the first nine months of outgoing fiscal year but the closure of business activity in the wake of Covid-19 impacted the tax collection. Non Tax Revenue stood at 1600 billion rupees against the target of 1100 billion rupees.
The Adviser on Finance pointed out that the current account deficit was hovering around twenty billion dollars two years ago and we brought it down to three billion dollars.
He said the foreign direct investment witnessed an increase of 137 percent in the first nine months of outgoing fiscal year.
Turning to the situation arising out of Covid-19, the Adviser on Finance said the government decided to tackle the situation with the aim to protect the vulnerable segments of the society. For this purpose, we gave a stimulus package of 1200 billion rupees. He said the cash assistance under the Ehsaas Program has been disbursed to ten million people.
Responding to a set of questions, Advisor on Finance Dr. Abdul Hafeez Shaikh said present government has been striving to increase per capita income and national savings. He said tax collection and national savings have historically been low in Pakistan, but we are committed to increase their rates. He said if we increase income of people, this will enable them to save more. Hafeez Shaikh said in order to increase per capita income the nation needs to create a balance between overall income and overall population. The Advisor said process of privatization has been expedited in the country and will be further expanded to bring efficiency in the public sector.
On another question, he said increase of 1000 billion rupees in target of FBR has been made to enhance national income. We are also taking steps to increase tax base of the country. Hafeez Shaikh said it is difficult to predict about the exports in near future due to prevalent situation of corona pandemic. He said provinces are independent to devise their own tax collection targets based on realistic situation.
He said first and foremost priority of the government is to preserve the employment of people.
He told a questioner that condition of providing Identity Card for purchase over 50,000 rupees has been revised to shopping of over 100, 000 rupees to facilitate people. He said we are committed on documentation of economy but at the same side we want to provide maximum relief to the people.
Hafeez Shaikh said inflation target for next year is 6.5 percent which is less than this year. He said government is committed to pass on the benefit of decline in international oil prices to people. He said changes will be witnessed in regulatory regime of oil soon.
On a question, he said the budget is for the next financial year, but amendments can be made in certain areas if need arises. Dispelling misperception of any dictation from the IMF, the Adviser said IMF is an international body and provides loans to countries to help stabilize their economies. It depends on countries to manage their expenditures according to their resources.
When asked about the petroleum levy rate, the Adviser said it has not been increased in the country and neither the government has any intention of it from existing thirty rupees per liter. The prices of petroleum have been reduced on the direction of Prime Minister to provide maximum relief to the public.
Minister for Industries Hammad Azhar said private sector is the engine of job creation. Our focus is on preservation of economy so that it runs smoothly and creates employment opportunities. He said we have improved our ranking in Ease of Doing Businesses and hope it will further improve next year. He said increase has been made in allocations for PSDP and a cash injection of fifty billion rupees has been made to SME sector to help it create jobs. Hammad Azhar said we have also given a number of incentives to construction sector because it creates employment.