KARACHI: The economy grew at an average rate of 2.9 percent per annum during the last five years though GDP growth witnessed growth in financial year 2012-13 to stand at 3.6% against the target fixed was 4.3%, the yearly report published by Federal Board of Revenue (FBR) said.
The performance by the important sectors of economy like agriculture, manufacturing and services remained below their capacity. However, the recent EU approval of duty waiver in the form of awarding GSP PLUS status (Generalized System of Preferences Plus) has created much wanted space for the economy.
Duty free access to Pakistan’s exports to the bloc of 27 member countries of European Union has offered much attention for the domestic and Chinese investors. The Chinese investors have started entering into joint ventures with local manufacturers to take advantage of trade concessions. Due to these developments, the ambitious growth of textile and clothing sector has become possible. One may hope that a prudent use of EU duty concessions avoiding any caveat therein will lead towards improvement of business environment and to the desired destination of economic stability.
The economy of Pakistan continued facing various shocks since beginning of FY: 2012-13. The energy crises got complex and worsened. The security hazards vastly affected the economic and social environment. The fight against terrorism got another additional front of sectarian extremism. The extensive financial constraints, economic mismanagement and less than capacity electricity generation despite its acute shortage have been the major weaknesses in the economy. An estimate indicated that around 2% of the GDP has been washed away due to power shortage. Moreover, the challenging scheduled payments due, to the international donor agencies added further difficulties for the economic management.
However, the positive aspects of the economy included comparatively lower trade deficit, strong remittances and above 33% decline in inflation rates i.e., reduced from 11.0% in 2011-12 to 7.4% in FY: 2012-13. Some prudent measures have been taken for improvement of economy (most important step was the settlement of circular debt to the tune of Rs 480 billion which paved the way of 1700 megawatts additional electricity generation). Similarly, easy monetary policy with low interest rate during the FY: 2012-13 increased the cheap credit borrowing by the corporate sector. Resultantly, improved performance by the large scale manufacturing sector became possible and observed.
Despite unfavorable economic conditions, the FBR has been able to collect Rs 1,946 billion at the end of the fiscal year 2012-13. A growth of 3.4 percent over last year’s collection has been recorded. The FBR revenue target for the FY: 2012-13 was fixed at Rs 2,381 billion with an envisaged growth of 26.5% over last year’s collection of Rs 1,883 billion. Keeping in view the broad based challenges faced by the economy, the revenue target was revised downward to Rs 2,007 billion and expected a growth of 6.6%. The important indicators considered for assigning of revenue targets includes expected growth in GDP, the rate of inflation, level of ease in monetary policy, growth in the Large Scale Manufacturing sector, tax buoyancy, budgetary measures and imports.
It may be worth mentioning here that the envisaged level of macroeconomic indicators used for determination of FBR’s tax revenue targets, remained significantly lower than expectation. The GDP growth, in nominal term, dropped from expected 16% to 11.4%, inflation from 12% to 7.4%, Large Scale Manufacturing (LSM) from 17.2% to 11.2%, total and dutiable imports from 14.5% to 3.3%. All these factors contributed in less than target collection of tax revenue.
Majority of the important targets of different sectors of economy were missed. However, performance of FBR at the tax collection front remained well during the fiscal year 2012-13 and has managed to collect Rs 1,946 billion. A growth of 3.4% was observed during the period when compared with last year’s collection.
The FBR has collected Rs 1,946 billion during FY: 2012-13, as against Rs 1,883 billion during corresponding period last year. An amount of Rs 63 billion has been added during FY: 2012-13. The performance is satisfactory when seen against the backdrop of extensive difficult conditions faced by the economy since beginning of the financial year. The tax-wise performance given in the following table shows that except the collection from federal excise, the collection from all the taxes has increased as compared to last year.
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