Top government officials have dismissed the possibility of freezing the $5.4 billion private foreign currency accounts (FCAs) as part of a backup plan, stating that there is no proposal to do so.
Dr. Aisha Pasha, the Minister of State for Finance, clarified that Prime Minister Shehbaz Sharif’s statement about going to the people was meant to prepare them for potential difficult measures if the IMF deal does not materialize.
The government’s alternative strategy to raise funds involves not inquiring about the source of income on foreign remittances up to $100,000.During the Senate Standing Committee on Finance meeting, the committee scrutinized the budget for fiscal year 2023-24, which includes an amnesty on hidden and tax-evaded money.
?The Federal Board of Revenue Chairman, Asim Ahmad, explained that the provision allowing inflows of foreign remittances up to $100,000 without disclosing the source of income is not a new amnesty but rather an existing provision in the law.
However, sources suggest that this amnesty contradicts the IMF program and the country’s commitments under the Financial Action Task Force (FATF).
Dr. Pasha stated that the proposed budget aligns with the objectives of the IMF program and shows a primary budget surplus of Rs379 billion. She acknowledged that the government may need to consult with the IMF regarding tax exemptions granted in the budget but emphasized that these exemptions are necessary to revive the economy and reduce poverty.
Critics have labeled the new budget as fiscally expansionary, while the State Bank of Pakistan (SBP) considers it slightly contractionary compared to the revised budget numbers.
Senator Mohsin Aziz expressed concerns about the lack of revival plans for industries and exporters, highlighting the government’s Rs7 trillion borrowing plan.
The committee’s proceedings revealed that the government has imposed taxes on several food items despite prevailing food inflation of over 52% in Pakistan.
The proposal to impose an 18% sales tax on various food products was deferred for review. The committee also rejected the extension of tax-free status for erstwhile Federally Administered Tribal Areas (Fata) and opposed the increase in the sales tax rate for Tier-I retail shops.