Ishrat Hussain calls circular debt one of the biggest problems of Pakistan. PHOTO:FILE
Husain was speaking at a pre-budget seminar jointly organised by the Karachi Chamber of Commerce and Industry (KCCI) and the Association of Chartered Certified Accountants (ACCA) Pakistan here on Monday.
“Today, one of the biggest problems of Pakistan is circular debt because of which power crisis has become uncontrollable,” he said. “So the new government has to handle it immediately after coming to power and for that it should stop subsidising electricity who can afford it.”
Elaborating, he said out of 20 million electricity consumers in Pakistan, only 1 million deserve subsidy. “For instance, if you produce electricity at a cost of Rs13 per unit and recover Rs8 or 9, it just does not make economic sense. If you continue subsidising those who can afford, you will not be able to sustain this system,” he added.
After the 18th Constitution Amendment, Husain stressed that provinces should take responsibility and generate significant revenues as it would bring down fiscal deficit of the country. “Provinces, especially Sindh and Punjab, need to improve their revenue base,” he suggested.
Discussing the role of the Federal Board of Revenue (FBR), he asked the FBR to stop issuing Statutory Regulatory Orders (SROs), which is the mandate of parliament and not of the FBR. “Unless the FBR stops issuing SROs, Pakistan cannot fully systemise its tax system,” he added.
Husain was of the view that the new government should give priority in fund allocation to two sectors – power and education – and complete projects associated with these areas within a year or two.
Earlier, he said, the governments had been misusing the Public Sector Development Programme (PSDP), leading to years of delay in executing projects.
About government borrowing from the central bank and commercial banks, he said, “I am very much against government’s excessive borrowing from the central bank as it inflates inflation. On the other hand, commercial banks make easy money by lending to the government that creates shortage of liquidity for the private sector.”
In an apparent reference to rampant smuggling, he stressed that the country could collect much more revenues if it went for reducing tax rates for different sectors.
Published in The Express Tribune, April 30th, 2013.
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Pakistan 's economy will never improve till you rationalise taxes and increse tax base and make FBR honest and efficient