IMF pressure influenced government decisions: Shaukat Tarin
- Finance Minister Shaukat Tarin describes the geopolitical situation and the commitments made with the IMF as the reason why the Fund is asserting itself.
- Said that the “allies” were put in confidence on the bills presented in NA and that their apprehensions were taken into account.
- The petroleum tax on fuel prices has increased in accordance with the request of the IMF.
Pressure from the International Monetary Fund (IMF) has influenced many government decisions, said Federal Finance Minister Shaukat Tarin.
The comment came as the Minister of Finance was speaking on a number of issues, including the 2021 Supplementary Finance Bill, the State Bank Amendment Bill, inflation, prior actions required by the IMF and other fundamental finance issues on Geo News program Geo Pakistan.
The minister, describing the geopolitical situation in the region as the reason the Fund is asserting itself, said talks with the lender to restore the US $ 6 billion Extended Financing Facility (EFF) were not unsuccessful. child’s play after the United States. withdrawal from Afghanistan.
He said another reason was the withdrawal of the old finance team from the government’s March 2021 commitments with the lender while borrowing a few million dollars as a loan.
The Minister said that the Supplementary Finance Bill and State Bank of Pakistan Amendment Bill 2021 have been presented to the National Assembly (NA) after Cabinet approval and now the government will try to get both bills approved as soon as possible.
He further said that a detailed briefing had been given to the “allies” to give them confidence on the bills presented in the NA and that their apprehensions had been taken into account.
âOur allies learned that the total volume of invoices did not exceed 343 billion and they understood it,â said Tarin.
Regarding the possibility and the deadline for the adoption of the finance bill, Tarin expressed the hope that it will pass easily and be promulgated by the Parliament within the time limit as promised to the IMF.
He went on to say that the IMF can be informed that the process has been initiated once the NA approves the two bills.
“We asked the IMF to schedule a meeting on January 12, and they agreed to call a meeting,” he added.
“It could take another 3 to 4 days beyond the important date of January 12, when the IMF’s board of directors approves the US $ 1 billion tranche.”
Speaking about the other bill tabled in the National Assembly, which deals with the autonomy of the State Bank of Pakistan (SBP), Tarin stressed that this bill also needs to be passed by the Senate, and he expressed the hope that this bill, too, will be passed. “We have put our allies in confidence and made them aware of all aspects of the bill and their concerns have been taken into account.”
Elaborating on the idea of ââthe autonomy of the SBP, the minister said that the SBP receives its independence but the bank can never be separated from the Pakistani government and the role of the finance ministry cannot be eliminated.
The abolition of the board of directors will not make a big difference, underlined the Minister of Finance. Asked about the coordination between the SBP governor and the finance minister, Tarin replied that he talks to the governor at least three times a day about the issues and that the perception of the misunderstandings and differences between them is wrong.
The political and financial implications of the Complementary Finance Bill and the State Bank Amendment Bill were also discussed during the program discussion.
“We are not imposing new taxes in the mini-budget, but removing tax exemptions amounting to Rs343 billion.”
He reiterated the fact that the common man will have to bear the blow of Rs2 billion only and the tax exemptions have been removed from the items that the elite class uses.
He said raising the tax collection target to Rs 6.1 trillion from the previously set target of Rs 5.9 trillion is not a constraint imposed by the IMF.
“We offered Rs 6.1 trillion ourselves, keeping our record collection in the first half of the year, which is way beyond target.”
In response to a question that if tax collection does not swell with this removal of exemptions, then what is the goal of the whole exercise and why the IMF insisted on it, Tarin said it was made to document the economy as several sectors have not been documented.
Shahzad Iqbal asked if this was for documentation purposes only then why the tax rate in some sectors had been increased because it could be documented on the existing rate.
“The IMF is of the opinion that there should be a uniform sales tax in all sectors, and then subsidies or refunds, as needed, should be given.”
The rise in the Consumer Price Index (CPI) was also discussed on the show. The finance minister agreed there was a 12.1% year-over-year increase in CPI data recorded in December 2021.
Tarin added that there was another angle to see things; rather than comparing the data to last year’s statistics, consider that prices fell in December compared to November.
âOur approach is half a full glass and your approach is half an empty glass,â Tarin said.
He called this price hike a dependent phenomenon as we import raw materials and global commodity prices are on the rise, but this global cycle cannot last long as the world takes steps to control prices.
“We have to do several things right, we will have to take measures to curb the depreciation of the rupee, we have to work for the control of the supply chain of commodities and the idea of ââcold stores for commodities.”
He also stressed that he was clear in his approach and will continue to express his heart and mind on the issues.
“We have negotiated with the IMF and the rupee has recovered and it will improve further when we get the tranche.”
He endorsed his view on unnatural undervaluation of the rupee. He said the SBP is now working proactively in this regard.
“I made my point clear and I categorically let the SBP governor and the commercial banks know that overprofit was being practiced,” replied Shaukat Tarin.
Shahzad Iqbal asked if he was satisfied with the decisions taken by the government.
“Things are looking in the right direction,” Tarin replied.
He added that he still believed that while capacity payments are an issue, line losses are the other issue that is costing us dearly; we also need to solve this problem and the performance of DISCOs needs to be improved.
âI pray that we leave the IMF once and for all now. If we were fine, then what was the need to go to the IMF? ”
“The tax on oil increased at the request of the IMF”
The finance minister also spoke openly about bitter facts like the IMF mood, saying that the oil tax on fuel prices has been increased in accordance with the IMF’s request.
âWe had reduced the sales tax on petroleum products to zero but were forced to apply the petroleum tax due to the strict behavior of the IMF,â Tarin said, adding that the IMF had loaned money to the government. country in March 2021 due to an increase in the oil tax.
The minister said that the Supplementary Finance Bill and State Bank of Pakistan Amendment Bill 2021 have been presented to the National Assembly (NA) after cabinet approval and now the government will try to get both bills approved as soon as possible.
The finance minister said the targeted subsidies tool was always with him when asked about the taxation of 850cc vehicles, solar panels and outlets, which should have been incentivized in accordance with government policy to encourage its use. The minister was reluctant to comment openly on the growing trade deficit and current account deficit.
“Razzaq Dawood should be asked about this.”
He predicted the trade deficit would be smaller over the next half of the fiscal year, citing no need to import wheat, sugar and vaccines like last year.