Govt Budget Irrelevant To Country’s Economic Crisis, Covid-19 Economic Fallout – Miftah
PMLN Central Leader and Former Federal Finance Minister Miftah Ismael says PTI indecision coupled with bad policies has landed Pakistan in severe economic strife and the presented budget shows that this government is incapacitated to recoup the drowning national economy.
In a video statement, Miftah said there is no doubt that the new coronavirus caused economic slowdown in Pakistan, like it did in the rest of the world. But covid-19 economic hit to Pakistan was worse than any other country because the national economy was already in a nosedive because of PTI’s blunders even before the pandemic.
“Blame and cuss the PMLN all day all night all you want. But at least do your basic job of going to the office and collecting taxes. Find ways to reduce expenditure. Dismissing the 18th Ammendment as impractical black law is unreasonable. Even if the government wants some Ammendment to it, it can be discussed for consensus, but that is irrelevant unless the PTI starts doing its basic job of revenue collection “, Miftah said.
Miftah said the PMLN government increased annual National Tax Revenues by 14.5 percent compounded. He said considering that the PMLN left the revenue collection at Rs 3,840 billion, continuing on the same pace of 14.5 percent increase, the tax revenue should have been Rs 4,400 billion. But despite adding Rs 700 billion in new taxes and withdrawing income tax concessions given by PMLN, PTI’s finance minister Asad Umar could otherwise even achieve the previous year’s target collected by PMLN and fell short of Rs 3,840 billion after setting themselves a target of Rs 5,500 billion, he pointed out. He said had the PTI government managed to even continue the speed of revenue growth being practiced by PMLN, they could have collected Rs 5,000 billion.
Even after massive devaluation PTI fells horticultural of 500 million in exports than PMLN and in the second year has only barely touched level with PMLN’s export number, the former Finance Minister said.
Miftah said a major share of the tax revenue comes from the ports through imports. He argued that it is a misconception that the tax revenue shrunk because of a decrease in imports. He said although PTI decrease imports by 10 percent, that decrease was in dollars. Whereas due to the 30-40 percent devaluation of the rupee there was a net 20 to 30 percent net increase in the import revenue in rupees, he explained.
He said the government has now set itself a target of Rs 3,908 billion in which Rs 100 billion have been added to grants from FBR collections which means the true target set for this year is Rs 3,809. This, he said, is even less than what was collected by PMLN government without the 35 percent currency devaluation.
The former Finance Minister said the economic slowdown under PTI government is because of marked reduction in Large Scale Industrial and Agricultural Production and has nothing to do with the current account deficit. He pointed out that PTI’s inability to fulfil its promises made regarding dedicated provision of electricity and gas to industry and agriculture and its exponential increase in policy rate from PMLN’s 6.5 to over 13 percent. This increase in rate not only hit industrialists but also the government’s domestic borrowing and the PTI paid Rs 2,300 billion in interest on domestic loans which the PMLN paid Rs 1,500, he said, and added that government would need to pay around Rs 2,800 billion in interest on domestic loans this year. This means the government will pay Rs 1500 billion more due to its interest rate increase blunder. This Rs 1500 billion is more than Pakistan’s Defence Budget, more than the revenue budget and more than the development budget, he pointed out. But the government does not seem optimistic about lowering interest rate as it has earmarked Rs 2900 billion for the debt interest already he said.
Miftah pointed out that this PTI government has increased l Pakistan’s total public debt by 50 percent in less than 2 years. According to the State Bank of Pakistan, When PPP left power the debt was Rs 14292 billion; when PMLN left government it was Rs 24953 billion. The PTI has added Rs 10254 billion to public debt in less than half of its term by March 2020. By the end of this month, the public debt will be Rs 37000 billion.
Talking about the GDP growth he said, had PTI not dented manufacturing and kept PMLN’s 5.8 GDP growth going, the covid19 economic fallout would have decrease it by 1-2 percent max. But because PTI’s policies reduce GDP growth to 1.9 in its first year, it has now plummeted to – 0.4, which experts say will be – 1.5, he pointed out.
Budget for a country in negative growth is entirely different from the budget under normal circumstances. But this budget by PTI in no way reflects that. The government has further cut the already slashed PSDP from Rs 700 billion to Rs 650 billion, whereas with negative growth it should have increased it, he said. Increasing the PSDP and starting development projects to re-employ workforce rendered jobless due to factory closures was a crucial opportunity missed by the government, he opined.
He said the growing deficit is one of the most worrisome issues. PMLN left the budget deficit at 6.5 of the GDP while the PTI has jacked it up to 9.1 and there is high likelihood of it going into double figures which is catastrophic for the country.
The PMLN Central Leader said these measures by PTI led to suppressed demand and reduction in consumption but the government did not even try correcting that with a reduction in income tax or GST to boost demand and public expenditure.
