The controversy about the population census is making the issues in fiscal federalism more complicated and challenging to resolve as policymakers have been stuck with the 7th National Finance Commission (NFC) award for over a decade.
The majority decision by the Council of Common Interest (CCI) to validate the 2017 Population Census and hold a fresh consensus for the next general elections has been rejected by Sindh, one of the country’s four federating units.
Chief Minister Syed Murad Ali Shah has made a pertinent point: in the past, CCI decisions were taken by the consensus of all stakeholders and not by a majority decision.
Prime Minister Imran Khan says his government has taken several initiatives for wealth creation so that it could get rid of heavy foreign loans with a strong emphatic assertion: “We want to create more and more wealth to retire heavy foreign loans some of which are causing more loans.”
In December, the Fitch Rating had downgraded Pakistan’s long-term debt rating from ‘B’ to ‘B-’ due to what it described as a high debt repayment obligation, low foreign reserves and fragile fiscal situation. Since then foreign exchange reserves have continuously improved on the back of a surge in workers home remittances, foreign financial inflows and significant rescheduling of debts.
THE FBR’s tax target of Rs6tr for the next year under the IMF-mandated fiscal adjustment policies will increase the income tax burden on salaried individuals, expand the scope of consumption tax and see the withdrawal of certain tax exemptions, besides raising electricity and petroleum products’ prices. The new revenue mobilisation measures will unleash another round of inflation while further squeezing purchasing power. In order to meet its other payment obligations such as debt servicing and recurrent expenditure like the defence budget, the government would have to reduce development spending, which would hamper job creation among other things. The government’s commitments to the IMF for resumption of the loan suggests that next year’s projected tax collection is 27pc or Rs1.3tr higher than the current fiscal’s revised target. This means people will pay the FBR an additional Rs570bn in 2021-22 owing to changes in income tax and GST. Likewise, they will pay almost Rs160bn