Revenue target of Rs1.6tr likely next year

ISLAMABAD: The federal government estimates next year’s revenue collection at Rs1.650 trillion and federal development programme at a reduced size of Rs300 billion amid an evasive stance of the International Monetary Fund about remaining instalments of the $11.3 billion package owing to a couple of policy slippages.
Informed sources told Dawn on Wednesday that the ministry of finance was comfortable with the third quarter performance on the fiscal deficit and revenue fronts despite certain slippages in tax targets. Provisional estimates suggest the government has remained within 1.6 per cent deficit target set for the third quarter as revenue collection stood at Rs116 billion last month. This indicates that even though the budgetary target of Rs1.380 trillion may not be achieved, the overall tax collection would reach Rs1.350 trillion by the end of the year against IMF’s original target of Rs1.343 trillion.

However, a row with the government of Sindh over value added tax (VAT), re-escalation of circular debt and indecisiveness over 6 per cent increase in electricity tariff could delay the disbursement of IMF’s $1.2 billion next tranche till next month. The IMF did not take up Pakistan’s case for the $1.2 billion assistance last month only because of a two-day delay in the introduction of VAT law in the provincial assemblies.

The focus of IMF queries has now shifted to the Sindh government’s demand for VAT collection at the provincial level and concerns over non-resolution of energy sector circular debt that should have been eliminated by end-March under the standby programme and additional creation of debt for commodity operations in recent weeks.

That would put additional pressure on the economic managers to have smooth sailing at the executive board meeting of the IMF if it is held before the end of this month. In case the IMF board meeting is postponed till next month, the government would need to put on the table the broad contours of the next year federal budget as well.

The sources said the political leadership was still undecided about the 6 per cent power tariff increase this month following last month’s riots over transport fares. The amount involved on this account is Rs8 billion for the last quarter of the current year but the government will have to request the IMF for a waiver in case it decides not to pass on tariff increase to the consumers.

In either case, the IMF was unlikely to consider Pakistan’s request before April 28 because it needed 15 days to circulate the case to the board members who would be pre-occupied with spring meetings of the World Bank and IMF between April 24 and 27.

These sources said that releases for the current year’s development programme would not be allowed to go beyond Rs250 billion owing to capacity constraints by the line ministries at the implementation stage despite Prime Minister Gilani’s announcement for a Rs300 billion federal public sector development programme (PSDP).

The PSDP for next year would be kept flat at a realistic Rs300 billion mark in view of transfer of responsibilities of health, education and social welfare (which are part of the concurrent list) to the provinces as a result of the proposed 18th constitutional amendment. That would provide a saving of about Rs60 billion to the federal government -- sufficient to absorb the additional burden of pay and pension increases recommended by a commission headed by Dr Ishrat Hussain.

The meetings of the priorities’ committee that scrutinise development schemes for inclusion in the next year development programme would be held from April 12 to 25. However, the government will need to thrash out differences with the provincial governments over the transfer of responsibilities and their demands for additional resources to complete ongoing provincial development projects currently being funded by the centre.

Source Dawn News