Imran Khan government has started taking desperate measures to increase revenues as the country goes bankrupt. In the Finance Bill 2019, the government has brought provisions under which the federal agencies could raid people’s houses in search for lost dollars, reported a Pakistani website Pakistan Today on June 22.
Once the bill is approved by parliament, Federal Board of Revenue (FBR), the financial law enforcement agency could raid the residential premises to look for undeclared assets like gold and foreign currencies. FBR has learnt that many households have dollars in their homes, the sources of which cannot be explained. As the Pakistani government produced the budget under the stringent conditions of IMF, it is under pressure to increase the revenue receipts and slash government spending.
As per the finance Bill provision, “The Commissioner shall subject to the condition as may be prescribed raid any premises where there is reliable information of undeclared gold, bearer security, or foreign currency and confiscate the same in order to enforce any provision of this Ordinance.”
The fiscal deficit of the country is around 2300 billion Pakistani rupees or 6.6 percent of GDP in FY 19. The currency of Pakistan has shed a quarter of its value and despite the devaluation, exports have not increased. From July through March FY19, the gap between government expenditures and revenues widened by 5 per cent of the country’s GDP.
Less than 1 per cent of the people (2 million out of 210 million population) in Pakistan pay income tax and the government plans to increase the tax base in the next financial year. The estimated fiscal deficit for the FY 20 is around 7.2 percent of Pakistan’s GDP or almost half of the total expenditure. Out of 7 lakh crore rupees gross expenditure, 3.1 lakh crore is being financed through the deficit.
The external debt and form a total of around 100 billion dollars. The external debt to GDP ratio of Pakistan is 36 per cent as opposed to the 20 per cent of India. Pakistan has only few friends left in the international arena to help the country. The country received a $3 billion bailout package from Qatar this week, after having received a $6 Billion bailout from Saudi Arabia.
In exchange of the $6 billion bailout package , IMF has demanded reform in tax structure, a reduction in the burgeoning defence budget, increase in the tax base, lowering the taxation limit, ending tax concessions on businesses, and market-oriented exchange rates. As the debt-ridden Islamic republic has kneeled on the defence cut and free-floating exchange rate, it is expected that other reforms would be implemented very soon.
For years the country has used the importance of its geostrategic location to to extract dollars from United States. Pakistan had become a pawn in the hands of the US in its proxy war with USSR. For years, the US pumped billions of dollars in Pakistan as financial and military aid. In the post-cold war world, it allied with China due to their mutual fear of India. But as the economic clout of China grew over the years, the relationship of equals became like that of a colonial subject and its master. Besides, trade with India is minimal as Pakistan refuses to act against and destroy terror camps thriving on its soil.
Pakistan’s economy is crippled and its forex reserves are dwindling at a perilous level at around $6 billion to $8 billion. In this urgent need for dollars and revenue, the government is jacking up consumer inflation rates, cutting subsidies and the income tax slabs go as high as 35 per cent. As if this was not enough, the people of Pakistan now have a legitimate concern that the administration might loot them under false pretexts, as the Imran Khan government empowers itself to raid homes to maintain its treasury.