‘MINI-BUDGET’ PLANNED AS IMF, GOVT STILL DIFFER: GOVERNMENT TO PRESENT ‘MINI-BUDGET’ NEXT MONTH

The government will present a 'mini-budget' through 'money bill' next month - third in a financial year - to impose/increase taxes to bridge over Rs 100 billion revenue shortfall of the Federal Board of Revenue (FBR) during the first five months of the current fiscal year. Finance Minister Asad Umar disclosed before a meeting of the Senate Standing Committee on Finance that some tax proposals to increase rates of taxes and decrease in duties on inputs consumed by the export sectors/industry are being finalised to be presented in 'money bill' in early January 2019. The finance committee was convened by Chairman Farooq H Naek to get briefing from the finance minister on talks with the International Monetary Fund (IMF) on the terms of conditions of new loans on Wednesday. This would be third money bill in a fiscal year and the second one by Finance Minister Asad Umar after the Supplementary Finance Bill was presented by him on September 18, 2018 subsequent to the last and sixth budget his predecessor Finance Minister Miftah Ismail of Pakistan Muslim League (N) presented on April 27, 2018. The finance minister, however, stated that final decision is yet to be taken; however, some tax proposals and duties and tariff reduction on inputs for exporters are under consideration. Umar told the committee that there is no urgency of going to the IMF as financing gap for the current fiscal year has been met with the help of friendly countries. "We have received $2 billion from Saudi Arabia out of promised $3 billion to Pakistan. Discussions with China and UAE are at final stages and these would yield positive results, while oil facility on deferred payment from Saudi Arabia will start soon," said the minister. Finance Minister added that the Saudi loan has been borrowed at 3.18 percent markup. The minister said that Pakistan has submitted a complete plan to the IMF how it wants to move ahead for stabilisation and discussion with the Fund has also been taking place through video conferences and one is scheduled for Wednesday evening. "We want an economically sound IMF programme that serves Pakistan's interests and would not accept anything opposite," said Umar, adding Pakistan will take the IMF loan if the Fund's programme entails reservations expressed by the senators. The finance minister said that governments in the past had stopped releasing refunds to exporters to show low fiscal deficit or to limit it but the present government has taken various measures to deal with the problems and improvement will be visible from the first week of January. Replying to questions, the finance minister said that flight of capital has been taking place and exports have gone down because of the two reasons including the country's production has been uncompetitive due to high input cost of electricity and secondly most of the foreign investment has been in the power, banking and telecom sectors while investment is not coming in production industry. The government needs to improve ease of doing business and tax reforms and both these issues are being addressed on priority basis. The government will make available gas at $6 per MMBTU and electricity at US 7.5 cents to the industry that has been complaining about high costs of gas and electricity, he further said, adding after these measures Pakistani exports will be able to compete with regional exports in the international market. The minister assured the committee that notification to provide electricity at 7.5 cents to zero-rated sectors will be issued any time and a mechanism to clear the pending refunds of Rs 250 billion of sales tax and drawbacks of local taxes and levies (DLTL) is being developed as the government wants to put in place a system so that exporters do not need to pay visits to the FBR. Umar said that Prime Minister Imran Khan had made a statement in 2014 about not going to the IMF and media has been running it recently and as far as going to the IMF is concerned, he claimed, "I stated on the face of IMF managing director it is unfortunate that Pakistan is going to the IMF". He said he also stated to the IMF MD that this would the last programme. Earlier, the finance minister stated that fiscal year 2017-18 was very bad year for the economy as current account deficit was over $18 billion and major challenge for the new government was how to bridge the financing gap. The minister disagreed with the senators that there was loss of confidence following recent depreciation of exchange rate and that was reflected in the stock market. He stated that this was a global phenomena and 500 point decline was not specific to Pakistan alone as there was global stock market sell-off due to global economic problems. The minister said that there was no precipitous depreciation on that day and it was only Rs 3. He said that governor State Bank of Pakistan (SBP) informed him about growing difference of spread and stated that something has to be done in the inter bank. Umar said he suggested to the governor that it should be done in a gradual way but final decision was to be made by him as it was his prerogative. "I shared with the Prime Minister what the governor SBP stated to me," he added.

The finance minister that Prime Minister emphasised for better handing of communication in the market and every one agreed that there is a need to strengthen the communication. The minister said that making decision about the exchange rate is prerogative of the governor SBP. Governor SBP Tariq Bajwa said that exchange rate is determined by the market forces and on that specific day, market overreacted to the adjustment but this situation remained only for half an hour with one transaction of $2 million. The market, he stated, operates on two fundamental - macroeconomic fundamentals and market sentiments.