ISLAMABAD: In a bid to lower ratio of borrowing to Gross Domestic Product (GDP), the Federal Board of Revenue (FBR) is about to opt for extra ordinary measures to increase the revenue collections.
As per Fiscal Responsibility and Debt Limitation Act 2005 (FLDRA), the ratio of borrowing of the country is fixed at 60 percent of the GDP and as per economists the current ratio has exceeded the said limit. However, the Finance Ministry is of the stance that the exceeding the limit of Debt to GDP ratio is not a violation of the constitution.
Section 3(4) of the said Act, allows government to temporarily depart from the limit. Any such instance is reported to National Assembly through Debt Policy Statement every year by end January.
The last report was submitted to National Assembly at the end January 2015. Besides, Medium Term Budgetary Statement is submitted to National Assembly with budget documents for approval which contain tentative timeframe for returning to the said path
A well-placed official source at FBR told Customs Today that in pursuance of the objective of reducing ratio of borrowings to GDP, FBR has geared up efforts to increase the revenue collection through tax reforms focusing on broadening income tax base.
In this regard, a number of austerity measures have also been introduced at FBR and related organizations through reducing other than obligatory expenditures and non development expenditures.
Moreover, the source said that Finance Ministry also pushed FBR to reform public sector corporations as well as to pave way for attracting non-debt creating flows the inflow of Remittances.
The source observed that by dint of measures taken by FBR, government was on the path to fiscal consolidation with a commitment to reduce the financing gap which ultimately would help reducing the dependence on debt in future as well as to return to the path to the ratio of debt limit as mentioned under FRDLA.
It is pertinent to note here that at present the ratio of debt trajectory is on the declining path which declined from 64% at end June 2013 to 63.5% at end June 2015. It is expected that as a result of fiscal consolidation measures debt to GDP ratio will come down to below 60% during the medium term.
