ISLAMABAD: Members of the Senate Standing Committee on Finance took Finance Minister Ishaq Dar to task for his claim regarding 17 percent growth in revenue collections, contending that it was achieved by blocking sales tax refunds of Rs415 billion.
The committee which met with its Chairman Senator Nasreen Jalil in the chair, also summoned tax authorities to explain why sales tax refunds had not been paid.
Durin the meeting Federal Finance Secretary Dr Waqar Masood informed the senators that all the targets of International Monetary Fund (IMF) programme for the third review had been achieved. Senator Ilays Balour contested the secretary’s claim, saying that Rs1,575 billion revenue collection included Rs415 billion sales tax refunds and if that amount was excluded, the revenue collection would register a decline of 16 percent during the first nine months of current fiscal year.
The committee also proposed to the government not to take excessive foreign loans because of their serious implications on foreign debt in case the rupee depreciated again subsequent to a contention by the senators that the economy is being run by borrowing and grants.
Senator Sughra Imam said that Finance Minister had committed in his budget speech to move towards a self-reliant economy. Dar has been unable to fulfil his promise as none of the macro-economic indicators reflect an improvement with respect to achieving self-reliance. She maintained that the country’s economy is being run either on grants or borrowing with no change in economic model as was promised by the Finance Minister.
Senator Saleem Mandviwalla said that Ishaq Dar has been celebrating borrowings and cannot cite a single case of foreign direct investment (FDI), which is critical. Dar has made a shift from domestic borrowing to international borrowing, he added.
According to the committee, the government must reduce foreign borrowing simply because the country’s debt can soar considerably in case of rupee depreciation in coming days. The committee is not against borrowing from Asian Development Bank (ADB) and the World Bank (WB) for infrastructure development, remarked committee chairman Senator Nasreen Jalil. She added that foreign borrowing needs to be rationalised.
Chaudhry Shujaat Hussain, Haji Adeel and other senators expressed concerns over the grant of $1.5 billion grant came with string attached. They questioned why the Finance Minister and government had tried to hide the donor country’s name initially.
Senators Haji Adeel said that country’s foreign policy had changed after the payment and people as well as weapons were being sent to Syria. On Eurobond, he said the bond had been issued at much higher rate than the market rate and the consequences of the debt would be borne by the future generations as the repayment of debt would be due after five years. Secretary Finance Waqar Masood said that Sri Lanka was able to issue bonds at lower rate because of better rating. Waqar Masood added that Pakistan had gone to international market after a gap of seven years with low rating and with a legacy of negative foreign inflows during the last three years.
The Finance Secretary said Pakistan was provided $1.5 billion as grant by Saudi Arabia, which was very helpful in bringing about stability in exchange rate and it led to an improvement in foreign exchange reserves. He said that balance of payment (BoP) concerns had been eased and the money had not come with any strings or conditions. We have deposited $1.5 billion in Pakistan Development Fund (PDF) account with State Bank of Pakistan (SBP).
The Secretary Finance said that self-reliance did not mean ending relations with the rest of the world and the debt limit of 60 per cent of the GDP as stipulated in the Fiscal Responsibility and Debt Limitation Act (FRDL) would be decreased to 58 per cent from the current level of over 61 percent. He said that the government would receive $4 billion foreign inflows in the last quarter, which would be utilised for repayment of local borrowing. As a result the local banks would have adequate funds for lending to the private sector. He said the government was also expecting to receive $800 million from Etislaat as all the properties, except four and 32 non-transferable had been transferred to their name.
He said the problem of BoP had been resolved for the near future with planned foreign inflows from various sources. A representative of State Bank of Pakistan (SBP) told the committee that foreign exchange reserves had increased to $7 billion with the credit of $2 billion of the Eurobonds.