Miftah says economic crisis is the result of financial mismanagement - bdsthanhhoavn.com

Miftah says economic crisis is the result of financial mismanagement

— Austerity budget aimed at addressing elevated fiscal and current account deficits, insists government

ISLAMABAD: Minister for Finance Miftah Ismail on Saturday blamed the misgovernance of the past governments for the damage to the economy which he claimed compelled the administration of Shehbaz Sharif to present one of the toughest budgets in Pakistan’s history.

Addressing the post-budget press conference in Islamabad, the minister said if the menace of maladministration was not addressed in a timely manner, it’d cause further devastation. “Which is exactly why this government had to present an austerity budget to address those issues,” he said.

Ismail was flanked by Minister for Information and Broadcasting Marriyum Aurangzeb, Minister of State for Finance and Revenue Aisha Ghaus Pasha and officials from the Finance Division.

He stressed the need to fix the country administratively, otherwise, the economy won’t survive. “We ask other nations for loans, packages and deposits. Pakistan is a proud country, a country of proud people, a nuclear power […] we will have to fix our economy,” he said.

“We should not incur such expenditures that we cannot afford.”

The minister said the budget was presented at a time when the country was experiencing hardships.

“At least for the last 30 years, I have never seen such difficult times where on one side Pakistan is faced with an internationally challenging environment and on the other, the governance mechanism has worsened,” Ismail remarked.

Unfortunately, no measures were taken by the previous government to fix the economy, he declared.

Citing massive bleeding of cash in the power and gas sectors, Ismail said during the last fiscal year alone, Rs3,400 billion in losses were recorded in the two sectors owing to subsidies and defaults.

The minister said subsidies of over Rs 1,100 billion were given to the power sector. The circular debt has reached Rs500 billion, taking the total losses of the sector to Rs1,600 billion, he said.

The country wasn’t able to bear those losses, which, if not addressed, would damage the economy, he added.

Likewise, the minister said, Rs400 billion in subsidies was given in the gas sector coupled with Rs1,400 billion circular debt whereas the Sui Northern Gas Pipelines Limited (SNGPL) faced a loss of Rs200 billion. Gas valuing $2.4 billion was lost annually at the network of the company which had never been accounted for.

However, he assured the government would provide gas to the industry at rates that were competitive in the regional market.

The minister said the previous government had caused huge damages to the economy, however, Prime Minister Shehbaz Sharif took difficult decisions and would continue to take more, if required, to put the country back on track.

The government had no other options but to make difficult decisions and the budget reflected that, he reiterated.

Ismail said during the current fiscal year, there was almost an Rs4,598 billion deficit. The four biggest deficits in the country’s history were witnessed during the Pakistan Tehreek-i-Insaf (PTI) government, he declared.

He said owing to the huge debts taken by the previous government, the incumbent government set aside Rs3,950 billion for debt servicing, which was equal to two defence budgets of the country.

The minister enumerated the total revenue target had been set at Rs7,004 billion and if non-revenue resources were added, it would take the total revenue to Rs9,000. Of it, an amount of Rs4,000 billion would be the share of provinces, hence the net collection with the government would be around Rs5,000 billion.

He said if Rs4,000 billion were spent on debt servicing, then the amount remaining with the federal government would be a mere Rs1,000 billion to manage its all affairs. If other liabilities were also counted, then the country would actually start the new fiscal year with an Rs600 billion deficit.

He said it was unfortunate that despite having huge resources, the country was facing such difficult times. Once it was ahead of India and Bangladesh, but due to mismanagement, “we have come to this bad situation”.

Ismail said that in the Benazir Income Support Programme (BISP), the government had increased its share by 40 percent, or Rs 100 billion.

He said Prime Minister Sharif had recently talked to the Indonesian president to lift a ban on the import of palm oil, as it caused a steep hike in its price to $1,700 per ton in the international market.

The government, he said, had also proposed a package of Rs20 billion for the promotion of seed oils, aiming to increase their production which would help reduce the external dependency on producing cooking oil.

The minister said in the budget, the government proposed one percent tax on the properties held abroad by the local people.

With respect to tax measures on personal income, he said the government decided to provide relief to the small and medium-income salaried persons as taxes were being reduced on those drawing monthly salary up to Rs200,000 per month, however, taxes were being increased on those getting a monthly salary of over Rs1 million.

He said the government had also decided to bring 2.5 million small businessmen into the tax net, who would be charged the fixed tax ranging from Rs3,000 to Rs10,000, which would be collected along with the utility bills.

To a question about a cut in the funds allocated for the Azad Jammu and Kashmir (AJ&K), he said the government had reduced all government expenditures.

With respect to the privatisation process, Ismail said the government was committed to continuing the process, and two large public companies would be sold immediately.

To a question with regard to the measures to reduce inflation, the minister maintained that the government’s first and foremost target was fiscal consolidation, to save the country financially.

Ismail gave an open offer to all litigant businessmen to withdraw their cases as the government was ready for out-of-court settlements under its ease-of-doing-business measures.

He said the government had set a target to bring 2.5 million shopkeepers into the tax net, who would be charged with a fixed tax of Rs3,000 to Rs10,000.

The minister said as the agriculture sector development was on top of the government’s agenda, it decided to withdraw duties and taxes on different agriculture implements, including seeds and agro-machinery.

The government also allocated Rs21 billion in the federal budget 2022-23 to increase crops yield, besides uplifting the livestock sector, he added.

Minister of State Pasha on the occasion explained the tough decisions announced in the budget were aimed at stabilising the economy.

In such circumstances, she said, the government had tried its best not to pass on the impact of tough decisions and revenue measures to the common man.

She said the measures to enhance revenue were anti-inflationary, and the government had also increased allocation for the BISP, besides providing significant subsidies on inputs to promote the agriculture sector.

The relief measures in the agriculture sector would help the country attain self-sufficiency in commodities, she added.

Pasha said additional taxes were imposed only on the wealthy people, in order to avoid further burdening the poor.

She said the world was passing through the super cycle of inflation and Pakistan was also not an exception, which was badly hit.

To another question, Pasha said: “We took measures to decrease the import-led consumption in order to help ease the inflation rate.”

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