Lack of coordination causing indecisiveness on core issues

Sources say finance ministry’s bureaucracy has locked political leadership

ISLAMABAD: Economic decision-making of the government has slowed down for the past few months as important issues, including the offshore tax amnesty scheme, sales tax refunds and a decision on the new free trade deal with China, remain pending due to lack of inter-ministerial coordination.

The Federal Board of Revenue (FBR), Finance Division, Economic Affairs Division and Commerce Division are facing a communication gap on critical issues that involve inter-ministerial consultations, said government sources in these divisions.

There is also ad-hocism and indecisiveness with matters not being taken to their logical end despite inter-ministerial meetings, said the sources.

However, internal matters of the Finance Division and FBR have not been greatly affected and most issues where other ministries are not involved are being settled at the usual speed of the bureaucracy, said the sources. Things started changing after October last year and the bureaucracy also became stronger after the exit of former finance minister Ishaq Dar, they added. Dar was known as a tough administrator and a task-oriented minister.

At least one federal minister has recently complained that his secretary became more powerful, said the sources. The minister and secretary of another economic ministry were also at loggerheads over certain government transactions.

The finance ministry is also not taking Minister of State for Finance Rana Mohammad Afzal on board on important matters. He has hardly been invited to important meetings and so far attended only one preliminary meeting on the budget and one on offshore amnesty that was held in the PM’s Office, said the sources. The special secretary finance is seen attending most of the meetings.

The Express Tribune contacted the adviser to prime minister on finance, commerce minister and minister of state for finance for their views. But they did not comment.

On important matters, the Finance Division and FBR are not on the same page, which has delayed decision-making, said the sources. So far only one meeting between FBR and the Finance Division has been held in the Q Block on the budget, which the government wants to announce on April 27. Unlike the past, the entire top hierarchy of finance ministry did not attend this meeting and the finance adviser also left the meeting in-between, the sources said.

So much so, the finance ministry announced the April 27 budget date without formally consulting with the FBR, the sources added.  The FBR spokesperson did not comment when asked whether the finance ministry formally consulted before announcing the date.

The decision about paying Rs50 billion sales tax refunds has remained pending despite a public announcement by Prime Minister Shahid Khaqan Abbasi to clear these refunds by February 15. The sources said that the government remained indecisive on whether refunds would be paid by lowering this year’s annual tax collection target or raising funds against sovereign guarantees.

The decision has to be taken by the finance ministry in consultation with the Prime Minister’s Office.

The sources said that despite holding many meetings, the prime minister has not yet given the final date for tabling a special law in parliament for giving an offshore tax amnesty scheme. Another issue that required a decision was whether to also issue a domestic tax amnesty scheme.

The matter of offshore tax amnesty scheme is also pending before the Supreme Court of Pakistan.

The FBR’s thinking is that the government should immediately introduce the offshore amnesty bill in parliament and by that time the Supreme Court’s recommendations will also be known. During one of the last meetings held on the issue in the PM’s Office, the participants left one after another before reaching a consensus, showing the government’s seriousness on the matter, the sources said.

The sources said that the Commerce Ministry also initially did not take the FBR on board on the issue of negotiations with China on Free Trade Agreement-II. The Commerce Ministry held a meeting with the stakeholders including the FBR on the intervention of the PM’s Office, they added.

But in an official handout, the commerce ministry underscored that it has taken all the stakeholders on board for the FTA-II negotiations.

The sources said that the commerce minister is also not in favour of signing the new FTA with China at this stage. They said that even the PM was not willing to further liberalise trade with China due to extremely adverse outcomes of the current FTA. Experts fear that if Pakistan lowers duties to zero on 75% of total tariff lines, many local industries will shut down.

Published in The Express Tribune, March 28^th, 2018.

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