News
Sunday, June 23, 2013
Govt to borrow more to repay IMF loan* Dar tells NA borrowing is inevitable as Pakistan has to service at least $3bn worth of foreign debts to save face
* No reduction in proposed 1% increase in GST rate
Staff Report
ISLAMABAD: Federal Finance Minister Muhammad Ishaq Dar on Saturday warned that facility of loan re-scheduling or moratorium was not available in the IMF, thus non-repayment of loan would be deemed default.
Speaking at the National Assembly session, he said the IMF authorities had expressed regret that why such a huge loan for Pakistan was sanctioned in the past as its repayment had become difficult.
He mentioned that government needs foreign inflows only for repayment of huge loans obtained by the previous governments. He mentioned it was in the best interest of Pakistan to meet debt repayment obligation on time as facility of loan re-scheduling or moratorium was not available in the IMF, adding non-repayment of loan would mean default.
He said the period of repayment of loans obtained by the previous governments had arrived, and the incumbent government was faced with a challenge of their repayment. He mentioned that Pakistan needs foreign inflows but only on terms suitable to it.
During the next fiscal year the government would be required to re-pay $3 billion IMF loan obtained under $7.6 billion Stand-By-Arrangement (SBA). For making this huge repayment while maintaining it’s foreign exchange reserves at a reasonable level, Pakistan would be required to engage with IMF as well as other key financial institutions to ensure repayment on time.
Meanwhile, the government on Saturday refused to reduce the proposed increase in the rate of General Sales Tax from 17% to 16% and 2% additional GST for UN-registered persons, saying that Rs 2.475 trillion tax collection target was essential for meeting revenue requirements.
However, it has been informed to the National Assembly that reduction in the rate of GST standard rate would only be considered in future in case Rs 2.475 trillion revenue target was met in the upcoming fiscal year 2013-14.
The rate of withholding tax has been increased from 10% to 15% for next fiscal 2013-14. However, it would be adjustable for the people who would file their returns and their final assessment would be made accordingly.
During his concluding budget speech, Ishaq Dar informed the House that government had approved all 112 recommendations of the Senate including 21% amendments in the Finance bill 2013 and announced all the recommendations would be implemented by the relevant ministries and divisions.
Giving rationale for keeping standard rate of GST, the finance minister informed that last government had incurred Rs 600 billion additional expenditures in the outgoing fiscal year that would be regularised through supplementary grants. Besides Rs 503 billion circular debt has to be cleared, reduction in budget deficit that is ending up at Rs.2 trillion in outgoing fiscal is essential and tax shortfall in the outgoing fiscal is also estimated at Rs.374 billion, he added.
Proposed tax liability rate for rental income of 17.5% have been withdrawn and new reduced rate of 10% for lower rental income and 15% for higher rental income have been proposed. However, the minister said these reduced tax rates would be withholding in nature and adjustable at the time of final assessment of the income of taxpayers.
Courtesy www.dailytimes.com.pk