Revving up the growth engine

The following mention appeared in Bol News on Mar 06, 2022 at the following link

https://pakistan.bolnews.com/business/2022/03/revving-up-the-growth-engine/

ISLAMABAD: The much-hyped efforts of the opposition parties to topple the government received a severe blow after Prime Minister Imran Khan announced a reduction in the prices of petroleum products and electricity tariff to curb the inflation.

Experts believed that Prime Minister Imran Khan’s timely decision to reduce the prices of the utilities would take the bite out of the opposition anti-government drive.

Pakistan Institute of Legislative Development and Transparency (Pildat) President Ahmed Bilal Mehboob said that the short-term measure will dent the efforts of the opposition parties.

“It seems to be a short-term measure but definitely it has confused the opposition parties, which adopted the narrative of inflation to topple the government and now it’s a very challenging task for the Pakistan Muslim League (PML-N), the Pakistan Peoples’ Party (PPP) or other parties to instigate masses to join agitation or long march to remove the government,” he said.

“Instead of relief or economic, I consider it a political package, which, to a great extent, fizzles out the steam of the opposition,” he said.

According to Mehboob, the opposition is also undecided on the future set up, which helps the government cause, because the PML-N and the JUI want early elections, whereas the PPP wants in-house change rather than dissolving the assemblies.

“PPP wants its government in Sindh to complete its tenure and early elections will hurt its interest, as well,” he said.

Prime Minister Imran Khan stunned his critics when he announced a “relief package” for the inflation-hit citizens by reducing the prices of petrol and diesel by Rs10/litre and electricity tariff by Rs5/unit with a pledge that the prices would not be increased until the next federal budget. The premier announced this decision at a time when oil prices are hovering over $110/barrel.

Spokesman for the Ministry of Finance Muzzamil Aslam said that this relief package will cost in the range of Rs275 to Rs300 billion to the national exchequer.

Regarding the International Monetary Fund (IMF) stance on the issue, he said, the government has conveyed this to them.

“Being a sovereign country we’re not answerable to them [the IMF] and the revenue collection by the Federal Board of Revenue [FBR] has already exceeded the target by Rs268 billion, which allows the government to provide relief to the common man who are badly affected by inflation,” he said.

Senior Political and Economic Analyst Ihtisham-ul-Haq also endorsed the Ministry of Finance views.

“Along with the surplus revenue, the government has saved over $1 billion from the IMF’s Covid Fund of $2.77 billion and that’s why it is a bearable relief package by all means,” he said.

Regarding the IMF’s possible concerns, he said, as per his knowledge, the prime minister visited Russia after he got a go-ahead from China.

“What I came to know from the senior government officials was a calculated move to safeguard the interests of the country,” he said.

The United States is still the biggest trading partner, as Pakistan exports to the US and the European Union stand at around 70 per cent of its total exports.

Haq warned that any major shift in the foreign policy in haste could lead to a disaster.

“The US has already expressed its displeasure and in retaliation imposed a penalty of $55 million for anti-money laws violation on the National Bank of Pakistan.”

Now it is likely that Pakistan will remain in the “Grey list” of the Financial Action Task Force (FATF) for some time after the announcement of the new tax amnesty scheme to lure investment from overseas Pakistanis in the industrial sector.

Regarding the opposition parties’ efforts to topple the government, he said, the opposition is still unable to convince the government allies — the PML-Q and the MQM — to withdraw their support to the government. Besides, their claim of establishment neutrality and getting support of the PTI’s dissent group led by Jahangir Tarin is yet to be confirmed.

“The government has resources and funds to lure parliamentarians, which the opposition parties don’t have,” he said, adding that through Kamyab Pakistan Programme of over Rs400 billion and tax amnesty and incentive scheme for setting up the new industrial units and increase in the coverage of Ehsaas Programme and Sehat Card Scheme will definitely help the government in regaining its popularity among the masses.

The industrial amnesty scheme offers overseas Pakistanis five-year tax holidays. Under the package, the investors will be liable to establish new industrial units by creating a new company.

Similarly, the businessmen can also avail this facility for balancing or modernising their existing industries, according to the summary that was reportedly approved by the Cabinet on Tuesday, March 1, 2022.

The government is yet to clarify whether or not it discussed this move in detail with the International Monetary Fund and obtained their go-ahead before making the announcement. Under the industrial package, tax incentives have been provided to industries through the introduction of special economic, export processing and special technology zones.

Commenting on the prime minister’s relief package, Former diplomat Zafar Hilaly said it seems that the government has decided to get rid of the IMF programme, which has tarnished its popularity graph.

“What I see is that the IMF in its upcoming review will not approve the next tranche and after the elections next year, the new government will be compelled to approach the IMF to overcome the balance of payments crisis,” he said.

He lamented the fact that the premier’s narrative of accountability failed and that is why he was forced to announce such populist and, at the same time, unrealistic package to restore his dwindling popularity.

“What the people don’t realise is that corrupt leaderships of the PML-N and the PPP hugely benefitted from this flawed accountability process and obsolete judicial system. If they come back in power it will be a disaster for the country.”

“It is unfortunate that the PM didn’t get any support from the state institutions to establish a transparent and fair accountability process,” he said.

The Prime Minister also announced a major tax incentive for the information technology and industrial sectors, including incentives for the promotion of the information technology sector with a 100 per cent tax exemption for companies and freelancers, 100 per cent waiver on repatriation of capital and foreign exchange, and elimination of capital gains tax for the startups.

The overseas Pakistanis would enjoy a tax holiday for five years for investments in the country.

Khan launched an interest-free loan programme worth Rs407 billion under the Kamyab Pakistan Programme, which, he said, would contribute to making the country’s low-income groups self-reliant.

According to the Ministry of Finance, the government would contribute over Rs230 billion to the programme on account of markup. Around 4.5 million families would benefit from the interest-free loans under this initiative to set up small businesses, construct homes, start farming and acquire technical education.

An amount of Rs2.5 billion had been disbursed by the government among the low-income groups in various welfare schemes so far, the premier said, adding that the banks had also given loans worth Rs55 billion after the government encouraged them to facilitate the common man.

The programme envisaged interest-free loans worth Rs500,000 for the businesses, Rs350,000 for farmers and Rs2 million for the construction of houses. Technical training would also be imparted to one member of each deserving family under the programme.

The other initiative taken by the government was the issuance of “Naya Pakistan Health Card”. The government claimed that by the end of March, all the families in Punjab would get the health card, reiterating the announcement he had made at the launch of the programme for the province in December last year.

 

 

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