February 26, 2014: Nation
Imran Ali Kundi
ISLAMABAD – Country’s economy has been facing various shocks for last few years, as energy crises worsened while security hazards vastly affected the economic and social environment.
This was the crux of the Federal Board of Revenue’s Year Book 2012-13. The book stated that extensive financial constraints, economic mismanagement and less than capacity electricity generation have been the major weaknesses in the economy. An estimate indicated that around 2% of the GDP has been washed away due to power shortage. Moreover, the challenging scheduled payments due to the international donor agencies added further difficulties for the economic management.
The economy, during the last five years, grew at an average rate of 2.9 per cent per annum. The GDP growth during FY2012-13 has been 3.6% whereas the target fixed was 4.3%. The performance by the important sectors of economy like agriculture, manufacturing and services remained below their capacity. However, there were some positive aspects of the economy including comparatively lower trade deficit, strong remittances and above 33% decline in inflation rates i.e., reduced from 11.0% in 2011-12 to 7.4% in FY2012-13.
Some prudent measures have been taken for improvement of economy (most important step was the settlement of circular debt to the tune of Rs. 480 billion which paved the way of 1700 megawatts additional electricity generation). Similarly, easy monetary policy with low interest rate during the FY2012-13 increased the cheap credit borrowing by the corporate sector. Resultantly, improved performance by the large scale-manufacturing sector became possible and observed.
Similarly, the recent EU approval of duty waiver in the form of awarding GSP+status has created much wanted space for the economy. Duty free access to Pakistan’s exports to the bloc of 27 member countries of EU has offered much attention for the domestic and Chinese investors. The Chinese investors have started entering into joint ventures with local manufacturers to take advantage of trade concessions. Due to these developments, the ambitious growth of textile and clothing sector has become possible. One may hope that a prudent use of EU duty concessions avoiding any caveat therein will lead towards improvement of business environment and to the desired destination of economic stability. The FBR’s yearly book also highlighted the performance of the tax department of the previous fiscal year 2012-2013. Despite unfavorable economic conditions, the FBR has been able to collect Rs 1,946 billion at the end of the fiscal year 2012-13. A growth of 3.4 per cent over last year’s collection has been recorded.
The FBR revenue target for the FY2012-13 was fixed at Rs 2,381 billion with an envisaged growth of 26.5% over last year’s collection of Rs. 1,883 billion. Keeping in view the broad based challenges faced by the economy, the revenue target was revised downward to Rs. 2,007 billion and expected a growth of 6.6%. The important indicators considered for assigning of revenue targets includes expected growth in GDP, the rate of inflation, level of ease in monetary policy, growth in the Large scale manufacturing sector, tax buoyancy, budgetary measures and imports. Majority of the important targets of different sectors of economy were missed.
However, performance of FBR at the tax collection front remained well during the fiscal year 2012-13 and it has managed to collect Rs 1,946 billion. A growth of 3.4% was observed during the period when compared with last year’s collection.