ISLAMABAD: The government has shown its inability to collect Rs1071 billion envisaged by FBR as tax collection target to meet the IMF performance criteria and indicative target for end September 2019, however, the budget deficit and primary balance targets will be materialised.
Ministry of Finance has come up with an “alternate strategy” to cope with expected FBR revenue shortfall for the first quarter of the current fiscal year as revenue gap will be bridged through increased non tax revenue collection and curtailing expenditures through slapping ban on approving of supplementary grants.
There is risk to spike in inflation because of dependence on imports of POL products and other commodities as in case of escalation in the aftermath of attack on oil refineries of Saudi Arabia might trigger a spike in oil prices.
On average the government has assessed the average inflation will be hovering around 11 percent. The IMF insists that the inflation will be hovering around 12 to 13 percent in the current fiscal year.
On GDP growth, the PTI regime has mainly relied upon betting improved agriculture sector growth as the macroeconomic framework shared with the Fund estimates that the cotton production would go up by around 3 million bales as the cotton sowing area increased by 14.7 percent in the current fiscal year. The rice production is also expected to go up from last year production of 7.2 million tons. The availability of improved water and good weather conditions have been proving as blessing for improved agri sector productivity.
“The FBR has conveyed to the visiting IMF team that the revenue collection will be standing around Rs one trillion against the desired target of Rs1.071 trillion by September 30, 2019,” top official sources said while talking to The News here on Thursday.
However, independent economists argued that they would be amazed if the FBR genuinely crossed Rs one trillion mark. But the IMF’s mission chief in last press briefing had ruled out possibility of revisiting any target under the Fund program at this stage and stated that the FBR achieved 50 percent revenue growth through domestic General Sales Tax (GST) while total Inland Revenue (IR) taxes witnessed 30 percent growth in first two months.
The FBR’s collection stood at Rs 580 billion against the desired target of Rs 644 billion in July and August 2019, witnessing a growth of around 15 percent. The FBR requires revenue collection of Rs 491 billion to reach at Rs 1071 billion till September 30, 2019 but the tax machinery is eyeing to Rs 400 billion to touch collection of Rs 980 billion to Rs 1000 billion.
Keeping in view apparent revenue shortfall faced by the FBR, the government has informed the visiting IMF team that the budget deficit in totality and primary balance related targets would be materialized for periods under reviews into IMF program.
“We have decided to increase non- revenue collection as Rs 70 billion already received as first installment from Jazz and Telenor as renewal of licenses fee,” said the official and added that another installment of Rs 70 billion would be received in coming months. The government also managed to get third installment of Rs 70 billion from Zong within the current fiscal year. The government plans to generate Rs 300 billion through sale of two RLNG plants by end of first half or early half of the current fiscal year.
The government has also shared macroeconomic framework and projected that the real GDP growth would exceed the target of 2.4 percent and might touch 3.5 percent of GDP mainly because of improved agriculture sector. In case of improved production of major crops, the government expects that it might help to kick-start economic activities on account of Large Scale Manufacturing (LSM).