(Tarin Says Realisation Of Growth Targets Requires Stability).ISLAMABAD: The government has set itself a medium-term growth target of 6-7 percent – this should not be generated through consumer incentives through loans, but through higher investment, efficiency, and increased productivity.
This was stated by Federal Finance Minister Shaukat Tarin in his speech at the National Workshop “Pakistan Economy – Vulnerability and Smart Action Strategies”, Balochistan-7, organized by Southern Command.
“We don’t just need growth, we need inclusive and sustainable growth. In the medium term, the growth target is 6-7 percent. Economic stability is needed to achieve this goal,” the minister said, adding that the government had committed to ensuring that growth rates remained intact.
He said the government’s development plan aims to allow the country to stand on its own two feet. This will put the economy on a higher growth path; growth is not generated by stimulating consumption through credit, but through higher investment, efficiency, and increased productivity.
The move aims to create and strengthen an economy that not only depends on itself but can also survive in global competition with its competitors, continued Tarigan. The finance minister said there is a strong relationship between the country’s national security and economic security, which in turn ensures sustainable economic development.
The current government is determined to run the national economy both at the macro and micro levels as efficiently and effectively as possible to achieve higher and sustainable and inclusive economic growth.
The government has developed a comprehensive package of economic reforms across all sectors of the economy, the minister said, adding that macroeconomic stability has been achieved and they are now moving towards a higher growth path.
He said the 2021-22 budget is a growth-oriented budget based on a strategy to stimulate economic growth with a clear roadmap of strategic priorities, revenue, and expenditure plans.
The growth target for the 2022 fiscal year is 4.8 percent
He said agriculture would be at the heart of development because of its relationship to employment, trade, and food security. An additional Rp 25 billion will be allocated for the development of the agricultural sector, he added. He said, to encourage and further strengthen the industrial economy, a major exception would be given for commodities worth Rp 45 billion to increase the competitiveness of this important sector.
The fixed tax regime and simplified tax returns for SMEs in the manufacturing sector, as well as risk-sharing and collateral and free loans to SMEs, provide various arrangements for the allocation of 12 billion rupees.
There is a special tariff for industrial electricity.
“We will create a CPEC platform where the industry will be relocated. “We’re introducing a new car policy and we’re introducing the Mary Gary Scheme,” he said.
As part of the car policy incentives, the tax relief previously granted to the automotive sector for vehicles of up to 850 cubic meters will be expanded to 1,000 cubic meters. The tax on textile products has been reduced from 12 to 10 percent. As part of the construction package, the income tax rate was lowered from 35 percent to 20 percent. Oil refineries have also been given tax breaks so they can switch to Euro 5 fuel, the finance minister said.
“In this context, we are taking various initiatives including taxes on exporters, which have been tightened and incentives for value-added products have been provided. Exports of IT and IT-based services are covered by the 100 percent tax credit. “Investments are being made in Special Economic Zones and Special Technological Zones and Rs 20 billion will be allocated to pay DLTL claims,” he said.
He said the government had put forward a comprehensive construction package. He said the housing program in New Pakistan offered a Rs 30 billion subsidy for low-cost housing construction.
“The country is facing an unusual expansion of production capacity, imposing unsustainable fixed capacity costs that cannot be passed on to consumers. This situation poses a threat to the health of the economy and it is imperative to tackle this problem militarily. We have formulated a circular debt management plan. This includes limiting line losses and improving recovery. We will continue to support low-income electricity consumers through targeted subsidies. We focus on improving the transmission and distribution system,” he said.
He said tax collection was set at Rs 5.8 trillion and FBR would achieve that goal by eliminating face-to-face contact through automation and use of technology, a universal self-assessment system, and third-party audits if they fail to pay. their taxes. Only a commission headed by the Minister of Finance has the power to withhold intentional tax evasion.
“12 withholding taxes were cut because they are regressive,” he added.
He said the government had increased the development budget from Rs 630 billion to Rs 900 billion to stimulate economic growth, reduce unemployment and poverty, and lead to inclusive growth.“We will reduce the budget deficit in the 2022 fiscal year by 7.1 percent to 6.3 percent of GDP. The primary deficit will be reduced to 0.6% of GDP. We have reduced the primary deficit by 3.2 percent in three years from 3.8 percent in fiscal 2019,” he added.
He also said that “the new development package announced in the 2021-22 budget will change the game for ordinary people – providing loans for farmers, job opportunities for young people, housing for low-income groups and a Healthy card; This is how you enhance our desk lifestyle. Currently, poor and middle-income households have limited access to credit. To solve this problem, the government decided to use resources from the banking sector as wholesalers. In this way, poor and middle-class households will have access to the banking sector. The state bears the additional costs and provides guarantees. “For the first time in the country’s history, we will use this growth model to bring financial resources to the threshold of the poor,” he said.
The Ehsaas program has budgeted 260 billion rupees in the 2021-22 budget, the finance minister added. He said the current government had inherited an economy in crisis with much higher macroeconomic imbalances.
“The current account deficit of $20 billion is the highest ever. Imports were about $56 billion, or 224 percent of exports of $25 billion, up from 162 percent in 2012-13. Higher imports are subsidized by an overvalued exchange rate which has remained constant at Rs 104 for almost five years. During this period, exports grew by minus 0.14%, while imports increased by more than 100%. Debts and liabilities, which amounted to Rs 16 trillion as of 30 June 2013, rose sharply to around Rs 30 trillion as of 30 June 2018, an increase of Rs 14 trillion, or 88%. The static ratio of taxes to GDP and the budget deficit is increasing,” he said.
He also said inflation had accelerated due to the strong deficit funding of the SBP and the devaluation of PKR.
Foreign reserves, which are mostly credit-based, rose from $6 billion in June 2013 to nearly $20 billion at the end of 2016, but then fell sharply to $10 billion at the end of 18 June. Despite the payment of the giant circular debt of 485 billion rupees in cash, the huge circular debt of 1.2 trillion rupees has accumulated again. “The eligibility for higher growth is based solely on reckless lending, an overvalued exchange rate, low-interest rates, and unprecedented lending from state banks,” he said.
According to him, the government made some difficult policy choices to avoid a crisis and lay the groundwork for a strong and sustainable economy through bilateral agreements, multilateral programs, IMF programs, and deferred oil payments. In addition, the current account deficit was controlled through exchange rate adjustments, export incentives and tariffs to limit imports of luxury goods, tightening energy prices, prudent cost management through austerity measures without additional subsidies, and zero credit from SBP.
Pakistan To Adopt Bottom-Up Approach For Growth: Shaukat Tarin
Shaukat Tarin, Pakistan’s minister of finance and federal finance, said Pakistan is moving from a bottom-up approach to growth as the runoff approach has not worked for the past 72 years.
Tarin said the government will use commercial banks to lend microfinance institutions such as Akhuwat and microfinance institutions to provide low-interest loans to 5 to 6 million households to start their own businesses, and these small businesses will drive growth. In practice, the Minister of Finance spoke at the opening ceremony of InfraZamin Pakistan Limited, the first of its kind to provide local currency guarantee solutions for infrastructure financing.
Tarin said Pakistan’s debt market is improving in terms of depth, breadth and liquidity. He said Pakistan’s GDP growth rate for the current fiscal year ending June 30 would be 4 percent. Growth comes from real estate, agricultural exports and the housing sector, which Prime Minister Imran Khan focuses on.
Tarin said Pakistan needs to continue to develop its economy as it has a large youth bank that provides at least 1.5 to 2 million jobs annually. So Pakistan will focus on inclusive and sustainable growth and microfinance will be our main vehicle. Each household in urban areas receives a loan of Rs 0.5 million for 3 years at a subsidy rate to start their own small business and in rural areas, each producer family receives 150,000 per crop.
Aamir Khan, Chairman of the Securities and Exchange Commission of Pakistan (SECP) also spoke as guest of honor. Khan said SECP expects to address 3 specific goals, viz. Increase the contribution of local actors to infrastructure project financing and deepen the institutional investment base; Development of local debt capital markets and support for infrastructure expansion through the PPP structure.
He hopes InfraZamin Pakistan will play a key role in ensuring greater private sector participation in sectors such as affordable housing, renewable energy, education, and health.