Imran Khan-led govt clears $400m foreign loan to double taxpayers

Published: April 16, 2019
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Representational image. PHOTO: REUTERS

Representational image. PHOTO: REUTERS

ISLAMABAD: The government of Prime Minister Imran Khan on Monday cleared the way for obtaining $400 million (Rs57 billion) in foreign loan to double the number of taxpayers to four million and enhance tax collection to 17% of the size of the economy.

This has raised questions over the Pakistan Tehreek-e-Insaf (PTI) government’s claim that people are not coming under the tax net due to the previous corrupt PML-N government. PM Imran is critical of foreign loans, yet his government has decided to seek $400 million for doing a job that can be done without taking a foreign loan.

“The concept clearance proposal of FBR’s project ‘Domestic Resource Mobilisation’ worth $400 million was also given approval by the Central Development Working Party (CDWP),” said a statement issued by the planning ministry. Minister for Planning and Development Makhdoom Khusro Bakhtiar chaired the CDWP meeting.

Overall, the CDWP meeting recommended three projects worth Rs209.5 billion to the Executive Committee of National Economic Council (Ecnec) including the Rs77.6-billion Rapid Sindh Bus project.

The internal working of the planning ministry showed that the Rapid Bus project was financially unviable, yet the CDWP sent it to Ecnec. However, the CDWP constituted a committee that would review the cost of the project.

The CDWP also approved the concept clearance proposal of Karachi Urban Mobility project (Yellow Line Bus Rapid Transit – BRT) worth Rs66 billion. The World Bank would provide a loan to cover 80% of the cost while the remaining will be provided by the provincial government.

FBR project

The Federal Board of Revenue (FBR) has sought $400 million in loan from the World Bank, despite a similar programme that badly failed a few years ago. Out of $400 million, $320 million will be linked with the achievement of certain targets.

The $400-million debt will be added in the name of expanding the tax-to-GDP ratio to 17% by 2023 and increasing the active taxpayers from 1.8 million to four million. Other so-called goals include reducing the hours required to pay taxes from 293.5 hours a year to 197.

The investment in new equipment and software development is needed by the FBR to utilise taxpayers’ data effectively in order to detect the increase in tax evasion by unregistered persons and under-declaration by the existing taxpayers, claimed the FBR.

However, the planning ministry was of the view that the FBR should have first provided the analysis of the impact of the last World Bank-funded tax reform project, which had badly failed. It also urged the FBR to undertake the reforms without taking a loan from the World Bank.

BRT project

The Government of Sindh presented ‘Construction of BRT Red Line Project’, worth Rs77.6 billion, which was also referred to Ecnec for consideration. The project envisages construction of metro bus dedicated corridors, measuring 29.1 kilometres (km) in length, from Numaish to Malir Halt depot and common corridor of 2.4 km.

The per kilometre construction cost will be Rs1.37 billion, while the total per kilometre cost of the project is estimated at Rs2.7 billion.

The project shall contribute to developing a sustainable urban bus transport system in Karachi with less travel time and enhanced mobility and accessibility. Estimated passengers per day would be 320,000.

Out of the total cost, the Sindh government would provide $88 million, whereas $474.3 million will be provided by the Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB) and French Agency for Development (AFD).

In May 2018, the project had been proposed to be completed at a cost of Rs65.6 billion, but due to currency devaluation, its cost has already jumped to Rs77.6 billion. The project will be completed in five years.

It was for the third time that the CDWP considered the Rapid Bus Project. Earlier, it had been twice deferred due to objections raised by the Ministry of Planning. However, the government of Sindh has not yet addressed issues about the procurement of buses, fuel cost estimates and lack of clarity over the operational plans of the project.  In order to sort out these issues, the CDWP has again constituted a committee.

The daily gas requirements for running these buses are estimated at 10,000 kilogrammes. The project’s annual operation and maintenance cost have been estimated at Rs3.3 billion.

CASA project

The CDWP also recommended the project of ‘500-KV HVDC Transmission System between Tajikistan and Pakistan for CASA-1000’ worth Rs45 billion to the Ecnec. The project envisions transmission of electricity from Tajikistan to Pakistan through Afghanistan.

The original cost of the project, approved in 2015, was Rs31.9 billion that has been increased by 44%. The cost of converter station is firmed up through the bidding process, but the other cost is still based on estimates.

The contract of 1,300-megawatt (MW) converter station was signed in September last year. The government has decided to allocate Rs9.7 billion for this project in the next fiscal year 2019-20 budget.

Hydropower project

The CDWP also cleared the ‘Balakot Hydropower Project’ worth Rs85.9 billion, which was presented by the Energy and Power Department of Khyber-Pakhtunkhwa. The project envisions construction of 310-MW Balakot hydropower project on Kunhar river, a major tributary of Jhelum River.

The Balakot hydropower project is located at an active earthquake zone and the project has been designed on earthquake resistance parameters. 

Published in The Express Tribune, April 16th, 2019.

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