A section of media on Wednesday carried a report contending that the country would be forced to re-enter into IMF program. The report has portrayed a negative picture of the economy and completely ignored positive developments.
The spokesman of the Finance Division offers following comments in response to the report:
The fact that Pakistan’s economic indicators are positive has been acknowledged internationally. Recently, ADB has stated that Pakistan enjoys growth despite trade contraction. The external sector which was under strain in last two years due to falling exports and declining remittances has now started showing positive and impressive growth both in exports and remittances. In August 2017 exports have witnessed a growth of 12.89 percent over the same period of 2016, while over previous month the exports are higher by 14.41 percent and imports are only 2.42 percent and during July-August, FY2018 exports have registered a growth of 11.80 percent. Similarly, workers' remittances have shown a growth of 13.18% during July-August, FY2018 and on month on month basis higher by 26.8 percent in August 2017. These all bode well that pressure on current account will ease, going forward. The growth in FDI is also on upward trajectory. During July 2017, FDI posted a stellar growth of 162.8 percent.
With regard to taxation, it is to be noted that the share of direct taxes in total taxes has increased over the years. In 1990-91 the direct taxes were just around 20% of total taxes, rose to 31.1 percent in 2004-05, 38.2 percent in 2012-13 and 39.1 percent in 2015-16. In FY 2016-17 the share of direct taxes reached 40% and it has become the single largest tax collected by FBR. The government is focused on further increasing the share of direct taxes through various policy and administrative reforms including broadening of tax base.
Substantial progress has been made to bring potential taxpayers in the tax net during the last four years. As a result of these efforts the number of income tax return filers which was around 766,000 for the tax year 2012 has risen to 1.26 million in the tax year 2016 and would further increase in coming years. The reforms program has started paying dividends in shape of higher tax revenues, an efficient, modern, transparent and taxpayers’ friendly revenue organization. The revenue collection has witnessed a substantial increase during last four years. The net collection increased from Rs.1,946 billion in 2012-13 to Rs.3,362 billion in FY 2016-17, registering an overall growth of around 73%. In absolute terms revenue collection has been increased by Rs.1.4 trillion. The tax-GDP ratio of the country has reached 12.5 percent in FY 2016-17.
With regard to debt, that PML(N) government borrowed record Rs.10.8 trillion is incorrect and based on incorrect projections. The actual increase in present Government’s 4 year tenure is around Rs.6.1 trillion. Even if the year 2018 is added as projected, the total debt increase in 5 years is expected to remain around Rs.7.5 trillion until 2018.The statement is only intended to mislead the general public by propagating increase in total debt by Rs. 10.8 trillion by the current government which is based on mere projections and may include PSE debt and other external debt and liabilities as well, which are not part of total government debt. Moreover, the contention of large borrowing from external sources is incorrect. Out of total debt, external debt proportion fell from 21.4 percent of GDP in 2013 to 20.6 percent of GDP in 2017. Against the total external debt, the largest component is multilateral and bilateral concessional debt, which constitutes around 85 percent.
External debt sustainability has increased manifold during the tenure of present government as recent debt sustainability analysis shows that external debt would remain on a downward trend over the medium term and staying well below the risk assessment benchmarks. The increased sustainability of external public debt is also evident from the fact that the 'Share of external loans maturing within one year' has been reduced from 68.5 percent of official reserves at the end of June 2013 to 31.9 percent at the end of December 2016 showing improvement in foreign exchange stability and repayment capacity. The fear expressed in the report that Pakistan would go back to the IMF for another bailout package is based on a false premise and incorrectly projected data. There seems to be no need for any international program including IMF for any bailout considering the debt dynamics have shown sustainability.