Published Date: Dec 8, 2015
Pakistan has no hope for achieving sustainable economic growth under the International Monetary Fund (IMF) $6.64 billion Extended Fund Facility (EFF) programme largely because it entails heavy taxation which will burden the formal sector, create incentives for informal sector and hurt investment.
Speaking at a panel discussion on macroeconomic stability and sustainable growth at the opening day of South Asia Economic Summit organized by Sustainable Development Policy Institute (SDPI) here Monday, former principal economic advisor to the finance ministry, Sakib Sherani stated despite multiple IFIs programmes economic situation has not improved in the country. He said the country has so far taken 12 International Monetary Fund (IMF) programmes since 1984, however, most of these programme could not be completed and consequently reforms have also been adversely impacted. He said the present programme of $6.64 billion Extended Fund Facility (EFF) focused on stabilization while structural reforms are missing because lenders were more interested to get their previous money back. "A large part of the lending was meant to get back their money."
He said there are three major targets of the EFF. These targets include accumulation of foreign exchange reserves, ceiling of fiscal deficit target and ceiling of borrowing from the central bank. In addition to these targets, there were many more structural benchmarks, etc.
Sherani said that as taxpayers in Pakistan as compared to percentage of the population was only 0.24 percent the revenue collection targets are achieved through enhanced tax rate on formal sector, he added. The government, he said has burdened formal sector under heavy taxation to achieve fiscal deficit targets of the EFF. The government imposed multiple new taxes such as removal of zero rating, Gas Infrastructure Development Cess (GIDC) as well as increase in withholding tax and non-payment of refunds to meet the revenue collection, he added. Sale tax on High Speed Diesel (HSD) has been increased to 47 percent which is detrimental for growth and economy as its primary consumption was agriculture sector and transpiration. The current tax policy of the government has created incentive for informal sector and inequality in the society. As a result, he added the people are not willing to invest in the country Sherani added as there was no institutional reforms, the country would continue to face similar economic troubled in the days ahead. Other speakers concurred with Sherani and stated "one can learn lesson from other countries that IFIs’ programmes do not work."
Talking to media after the session on Corridor for Development, Minister for Planning and Development Ahsan Iqbal stated that China Pakistan Economic Corridor (CPEC) is now being viewed as very important project for regional connectivity and would open new avenues for development not only for Pakistan but also for other regional countries.
He said India, which is not raising concerns, would also understand its fruitful effects when it would help them to benefit in terms of trade with China. He said the government would alleviate concerns of all political parties. The minister stated the government wants to complete energy project in the first phase to minimize the load shedding in the country. The minister added that CPEC project was for all the provinces and the government was proceeding ahead as far as the route was concerned according to All Parties Conference decisions.