According to a Business Recorder exclusive, the Miftah Ismail-led Finance Ministry has gone one step further than during the tenure of the Ishaq Dar-led Finance Ministry by projecting revenue sources that are not only baffling senior Finance Ministry officials but are also being challenged by the Federal Board of Revenue (FBR). The BR report was based on a footnote in the budget documents indicating that while 800 billion rupees was the total federal Public Sector Development Programme (PSDP) another 250 billion rupees - not a small amount as this is comparable to the 265 billion rupees projected from the federal excise duty and 300 billion rupees from petroleum levy for the entire 2918-19 - would be generated from self-financing by corporations/authorities. Perhaps Ismail felt this was the only way to appease the Planning Minister Ahsan Iqbal who had reportedly insisted that the PSDP be close to the one trillion rupee mark.
Be that as it may, it would have been appropriate for Ismail to first ascertain whether there was any capacity in public sector entities (PSEs) to generate money. In this context, the March 2018 report uploaded by the International Monetary Fund on its website titled First Post-Programme Monitoring Discussions noted that “the combined accumulated losses by the PSEs now exceed 1.2 trillion rupees (4 percent of Gross Domestic Product) which would eventually lead to sizeable demand for budgetary resources.” In other words, by a stroke of the pen, Ismail stipulated that these entities would be able to generate 250 billion rupees – an action that puts even his predecessor Ishaq Dar to shame whose data manipulation had reached legendary levels (relatively easy to ascertain as there was no data rationalization even between different government ministries/entities, leave alone with credible industry data).
When asked by BR, one Finance Ministry official stated that perhaps the Federal Minister envisaged these entities would raise the amount through commercial borrowing with a guarantee provided by the Ministry; however if this was indeed Ismail’s rationale then to add this amount to the federal PSDP thereby giving a PSDP grand total of 1.03 trillion rupees is lack of understanding at best and deliberately misleading the public at worst. To then claim sanctimoniously that the Abbasi-led administration has set aside 100 billion rupees for development projects for the next government, simply defies logic and must be challenged in parliament.
There is also the matter of Ismail challenging the data presented by FBR. The Board calculates Ismail’s total additional tax measures subtracted by incentive package at a grand total of negative 91.17 billion rupees for next year; while he had the temerity to note in the budget documents that tax revenue would rise by 13.4 percent. His rationale, clearly not backed by FBR estimates, is that growth would automatically raise tax revenue. BR has repeatedly pointed out that in Pakistan tax revenue is not linked to growth, mainly because of a small number of income tax filers, and heavy reliance on sales tax (withholding tax is also in the sales tax mode but credited under income tax implying double taxation on income for filers that is not an incentive for non-filers to begin filing returns) which implies a larger portion of disposable income of low income groups goes into realizing the sales tax revenue.
To conclude, the budget makes several unrealistic projections and its only redeeming aspect is that the next elected government will present another budget which one can only hope is more realistic and grounded in actual as opposed to grossly unworkable data.