The Federal Minister for Finance and Revenue, Shaukat Tarin, said that the government is using residual profits from its oil and gas enterprises, worth approximately Rs. 1.2 trillion, to pay Rs. 104 billion in fuel and diesel subsidies, Rs. 136 billion in electricity subsidies and a slew of other tax breaks and discounts.
During a press conference in Islamabad today, the minister was questioned whether Prime Minister Imran Khan’s comments would be detrimental to Pakistan’s commerce with the EU. In response, Mr. Tarin said, “PM should not have reacted publicly against the EU, but I don’t think we should worry about what they [EU] will do.”
Minister Tarin said that no other country could dictate Pakistan regarding its foreign policy as Prime Minister Imran Khan has taken an open and neutral position on the Russia-Ukraine issue.
Reverting to the subject of subsidies for fuel and electricity, he said that the tax revenue of the government is not falling, rather surpassing the targets, though marginally. “This all sums up into a budget deficit within limits, and a no objection is likely from IMF,” he said.
The minister further clarified that the subsidy was previously Rs. 78 billion but is now Rs. 104 billion.
“The petroleum levy is reduced and the sales tax is removed. Development spending on PSDP projects will face some reduction, COVID imports have some savings, and the Ehsaas programme has some contributions. All in all, there is no rise in the fiscal deficit and the IMF might not have any concern,” he explained.
He remarked, “With that, Pakistan has asked the Fund to remain polite and give us some space than staying harsh and stringent on us. Even if the government uses Rs. 950 billion of the profits of the oil and gas companies, there is a huge fiscal space.”
On the subject of the overseas Pakistani industrial package, he stated that it is a highly focused framework that seems like an amnesty, but in their survey, Pakistan has progressed to a very profitable market. Another ‘sick industry revival program’ has also been announced in order to expedite industrialization, Minister Tarin stated.
He also justified the declining trade deficit in February and leveling of inflation in the last four months. Except for tomatoes, the CPI was around 10 percent, and that is due to the base effect.
“[The]CPI from November till February was unchanged, only the international price effect is pushing it up,” Minister Tarin mentioned. He also remarked that the trade deficit is even better than during the pre-pandemic period. “Despite these crises, we maintained our reserves and met our payments,” he added.
The minister said that Pakistan is in a medium-term growth mode of four to five percent, and it can exceed it. “If the Rs. 900 billion subsidy was not to be given in these tough circumstances, then the target of taxation could have crossed Rs. 7 trillion,” he stated.
Furthermore, the estimates of the wheat crop are highly positive due to rains, which points to a potential bumper crop this year that will contribute to the overall health of the economy.
Regarding the government’s aim to offer healthcare services to the nation, Minister Tarin affirmed that the Sehat Card has a 97 percent satisfaction ratio in initial surveys, which is very high and positive.
On a separate subject, he revealed that a four-point framework for the resettling of industry, agriculture produce, IT sector, and trade imbalance was recently discussed with China. The minister also mentioned that Pakistan had imported $10 billion worth of food items, where China can assist.
The industry payments for Chinese IPPs were cleared before going to China, which, according to Minister Tarin, will encourage them to bring more investments to Pakistan in the future.