Prime Minister Abbasi has finally picked Dr Miftah Ismail as his Adviser for Finance, Revenue and Economic Affairs with the status of a federal minister. We welcome the announcement as there is some clarity on who is the boss.
Dr Ismail, a successful entrepreneur and a former economist at the IMF, understands the free market dynamics. But he has no experience in public economic policymaking except his stint as chairman of the Board of Investment where his task was only limited to overseeing foreign direct investment.
After his appointment Dr Miftah has announced his immediate priorities that on the one hand will address the policy gaps left out by Dar and, on the other, will appease the influential industrialists ahead of the next general elections. But this is an uphill task and his priority areas are ones where all powerful Dar could not make a major dent.
Dr Miftah’s immediate tasks are lowering individual tax rates, widening the tax net and coming up with a scheme to repay the refunds to taxpayers, which according to our estimates are now more than Rs300 billion. The other two priority areas he has set for himself are to reform certain corporate taxes that are adversely affecting capital formation and giving an offshore tax amnesty scheme that will allow Pakistanis to either repatriate their wealth to Pakistan or legalise them by paying nominal taxes. The success in giving offshore amnesty scheme may guarantee the PML-N support of wealthy classes in the upcoming elections.
All his priority areas are in the FBR where another political appointee, Haroon Akhtar Khan, is looking after the tax affairs. It will be a challenge for Dr Miftah to create an environment conducive to conditions where both can work together. He also has a challenge to control the fiscal deficit ahead of the elections. He may be forced to take many politically motivated but economically unviable decisions. He will have to show restraint in opening the public purse and tackle the yawning current account deficit, as $2.5 billion raised through sovereign bonds last month will not prove enough. We wish him good luck.
Published in The Express Tribune, December 28th, 2017.