ISLAMABAD: As the rest of the country was watching the Raymond Davis saga unfold, President Asif Ali Zardari took an unannounced trip to Dubai to find an answer to the country’s economic woes.
He visited the Gulf state for a couple of hours a few days ago to seek the intervention of the UAE leadership for the payment of $800 million that Etisalat owed to Islamabad for the country’s largest privatisation transaction — Pakistan Telecommunication Company Limited — Dawn has learnt.
Etisalat has been holding back payment of about $800 million, of the $2.8 billion PTCL’s privatisation proceeds for about four years because of a dispute with the Pakistan government over legal transfer of land and property titles.
The government had sold about 26 per cent stakes along with management control of the PTCL in July 2005.
“The entire amount is expected within a few days,” an official said, adding that the dispute between the government and Etisalat over the delay in transfer of some land titles to the PTCL in Sindh had been resolved.
Islamabad hopes this breakthrough, along with two other major steps — the government plans to raise another $1 billion (about Rs86 billion) from the sale of assets and about Rs46 billion from new tax measures within the current fiscal year — will strengthen Pakistan’s case before the International Monetary Fund.
In fact, Islamabad put on hold its talks with the IMF, which were tentatively scheduled for this week in Dubai, to finalise these three measures before seeking the revival of the Fund’s programme.
Apart from the money it is hoping Etisalat will cough up, the government plans to raise about $1 billion through a combination of international and domestic divestment of government shares in state-owned entities such as Oil and Gas Development Company Limited, Islamabad Electric Supply Company, Habib Bank Limited and Kot Addu Thermal Power Company.
The third step, which also might be the most controversial politically, is additional taxation.
Revenue measures
Federal Board of Revenue Chairman Salman Siddique told the Senate’s Standing Committee on Finance on Wednesday that the government had prepared new revenue measures worth Rs46 billion to put the IMF programme back on track. He said the revenue target for the current financial year had also been increased to Rs1,630 billion.
Earlier, the floods had compelled the government to reduce the target to Rs1,604 billion.
He said that the new measures included the revenue the government planned to collect from a 15 per cent flood surcharge on withholding tax and an advance income tax. Imposed from April 1, both measures are estimated to yield Rs27 billion.
He told the committee that the flood surcharge, which was originally proposed at 10 per cent, would now need to be higher as five months had gone by without it being imposed.
Another Rs9 billion is expected to be generated through a hike in the special excise duty on imports, which would be increased to 2.5 per cent from one per cent, while Rs5 billion each would be generated by broadening the tax base and the recovery of arrears.
The details of the measures, the sources said, were also shared with the PML-N’s parliamentary team, led by Senator Ishaq Dar, during recent talks on economic reforms and were “well received”.
However, the government is not going to end its budgeting brainstorming and planning here.
It is also planning to raise another Rs55 billion through the launch of third generation mobile telecom licenses. The entire project is estimated to yield over $2 billion (more than Rs170 billion) over three years.
In addition, Islamabad has asked the provincial governments to provide a minimum of about Rs100 billion as cash surplus during the current year out of Rs300 billion additional transfers made under the new National Finance Commission award.
With all these measures, the government expects to contain the current year’s fiscal deficit at about five per cent of GDP against the revised IMF target of 4.7 per cent. This sounds miraculous when compared to the fact that the fiscal deficit was earlier estimated to reach 8.4 per cent.
However, these drastic measures are the bitter pill the authorities and the people have to swallow as the multilateral lenders had stifled the flow of about $1.5 billion ($500 million each from the World Bank, Asian Development Bank and Islamic Development Bank) part of a three-year budgetary support programme for Pakistan, because of problems with the IMF programme.
All the three institutions want Islamabad to secure a letter of comfort from the IMF before they resume financing. The IMF programme inflows have been suspended since May because of non-implementation of revenue mobilisation measures, including the reformed general sales tax.
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