Use development funds as ‘stimulus’ to revive growth, advises IMF – Newspaper

ISLAMABAD: The International Monetary Fund (IMF) requested on Friday the federal and provincial authorities of Pakistan to introduce a single tax base and make full use of development funds as & # 39; stimulus & # 39; to revive the economic growth that he estimated was one of the lowest with 2.4 percent for the current fiscal year.

An IMF team led by the Head of Mission to Pakistan, Ernesto Ramírez Rigo, is in Pakistan for the first quarterly review of the 39-month fund program. The mission met Friday with federal and provincial economic managers, including Punjab finance ministers, Khyber Pakhtunkhwa and Baluchistan, Sindh's special secretary of finance, as well as financial advisor Dr. Abdul Hafeez Shaikh and Planning Minister, Makhdum Khusro Bakhtyar.

Rigo "stressed the full use of the development budget to achieve development goals," said a statement issued by the Ministry of Finance.

Separately, Planning Minister Khusro Bakhtyar said he "thanked the IMF for reinforcing the need for increased public sector development spending to stimulate economic growth."

Rigo also stressed the need to “harmonize the tax system and create a single tax base, as it directly impacted the ease of doing business and contributed greatly to creating a conducive business environment and increasing the confidence of investors and entrepreneurs. .

Proposes a unique tax base to help create an enabling business environment

Dr. Shaikh told the IMF that the federal and provincial governments were in a continuous dialogue to improve coordination and create harmony in matters related to fiscal and budgetary management, the multiplicity of tax rates and the reconciliation of the adjustment of supplies.

The adviser said that the harmonization of taxes and other fiscal issues within the constitutional framework was a challenging process, but ongoing dialogue and coordination between the center and the provinces and between the provinces themselves had resulted in better management of the budget and expenditures. .

On the other hand, he said that the problems of defining what constituted a service and what tax rate was applied in different regions were also being resolved with a spirit of understanding and mutual accommodation.

The provincial ministers of Punjab, Khyber Pakhtunkhwa and Balochistan, as well as Sindh officials, disagreed with an observation by the IMF chief who suggested that higher tax collection showed that companies were doing well.

Punjab Finance Minister Hashim Jawan Bakht responded that the economy had in fact contracted and that the improvement could be attributed to better fiscal management and greater efforts at both the federal and provincial levels.

KP Finance Minister Taimur Saleem Jhagra believed that further improvements could be achieved if there was trust at various levels in the center and the provinces and stakeholders do not retain the information and money. There should be better coordination.

The provincial representatives also shared their experiences and informed the IMF mission about various measures and strategies implemented in their respective provinces to achieve better fiscal and budgetary management.

A statement from the Ministry of Finance said that Rigo was impressed by what he described as good financial and fiscal management and maintenance of expenditures within the budget, but called for full use of the development budget to achieve development goals.

He said that Pakistan had a continental-sized economy, very similar to that of Western Europe, where everyone had the same definition of the tax rate and services, and the same could be achieved in Pakistan through uniform tax rates and a tax administration unique instead of two or three taxes. authorities of each province.

Appreciates the current level of understanding between the center and the provinces and hopes that such efforts continue to generate consensus and generate greater harmony.

Separately, the planning minister told the mission that the government was allocating additional resources for the socio-economic improvement of disadvantaged areas through the regional equalization program and that attention was being given to improving productivity by investing more in the economy of the knowledge, education, water resources and correct transmission delays.

Bakhtyar said the government had an obligation, under the Water Policy, to allocate 10 percent of the total PSDP resources for the water sector to improve storage capacity and more attention was being given to projects that are about to end.

At the same time, he said the government was also trying to take advantage of private sector resources to complement the country's development needs.

Rigo expressed optimism about the future prospects for Pakistan's economy by highlighting the first signs of recovery as more machinery was imported, which in itself reflected greater confidence in the country's investment outlook. He also highlighted the increase in exports in quantum terms, according to a statement.

Posted on Dawn, November 2, 2019