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Aftab Maken
ISLAMABAD: Finance Minister Muhammad Aurangzeb on Friday revealed that India once again attempted to block International Monetary Fund (IMF) funding for Pakistan, but this effort was unsuccessful.
The disclosure was made during a meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, where the finance minister was briefing the committee on the budget. The finance minister further stated that during the IMF board meeting, the Indian director tried to halt the proceedings.
“Yesterday, India made another attempt to stop funding for Pakistan,” the finance minister briefed the committee. “However, despite India’s efforts, $700 million was approved for Pakistan. The International Finance Corporation (IFC) approved the financing with the World Bank’s vote.”
During the briefing, Muhammad Aurangzeb expressed optimism that the policy rate is expected to fall to a single digit within the current fiscal year. “Throughout the year, there were rumors that a mini-budget was imminent,” he said. “Independent chambers and surveys are now indicating that investor confidence is rising. We have achieved success in energy and state-owned enterprise (SOE) reforms.”
He acknowledged a setback in privatization during the current fiscal year but expressed confidence in achieving success in the upcoming fiscal year. “We have reduced the burden on the salaried class and have lowered transaction taxes in the construction sector,” he added. “It was a benchmark with the IMF to implement the agricultural tax from this year.”
He further noted, “On the Prime Minister’s direction, we negotiated with the IMF on the agricultural tax, and thankfully, the IMF agreed to our position. Exports have seen an increase of 7.8% in the current fiscal year.”
The Secretary of Commerce added that exports in the previous fiscal year were $29 billion, and in the first 11 months of the current fiscal year, they have already reached $30 billion.
The Finance Minister also addressed concerns about trade, stating, “Letters of Credit (LCs) are being opened. If they are not, it should be specified. Sweeping statements should not be made. State Bank officials are present here; they know everything.”
During the meeting, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial briefed the committee, identifying a tax gap of Rs 7,100 billion in the current fiscal year. “Pakistan’s tax-to-GDP ratio is lower than other countries. This year, the tax-to-GDP ratio has been increased from 8% to 10.5%,” he said.
He pointed out that India has raised its tax-to-GDP ratio from 13.4% to 18.5%. “In Pakistan, only 5% of the population is supposed to pay taxes, and even that 5% is not paying what they owe,” the FBR Chairman stated. “Taxes amounting to Rs 3,100 billion are not being collected from the manufacturing sector.”
The FBR Chairman also highlighted smuggling issues, stating, “Smuggling is currently happening from the Chagai district border. While other border areas are strict, the Chagai border is vast. Smuggling through the borders is causing revenue losses of Rs 500 billion.”
Rashid Mahmood Langrial added, “Usable materials were being imported under the guise of scrap. That’s why we set a limit on the percentage of scrap that can be imported. Problems have been arising since the introduction of the Export Facilitation Scheme. We need to align our standards with international standards.”
Committee member Muhammad Mubeen Arif remarked, “In Pakistan, we repair and reuse old items. In other countries, old items are dismantled and turned into scrap.”
The FBR Chairman concluded by stating the tax collection target for the next fiscal year. “Our tax collection target for the next year is Rs 14,131 billion. There are enforcement measures of Rs 389 billion and new tax measures of Rs 312 billion for the next fiscal year. This Rs 312 billion should not be considered an additional burden.”
