Ambitious $60bn three-year target set, despite exporters’ concerns on taxation structure
ISLAMABAD: The government has set a new ambitious export target of $60 billion over the next three years despite changes to the tax structure in the budget that have sparked widespread discontent among the country’s exporters.
Commerce ministry officials craft presentations to support the wishes of every new government without considering the practical challenges faced by the export sector and the export earnings projections of international lenders.
Official sources informed Dawn on Monday that Prime Minister Shehbaz Sharif met with his economic team, which included Deputy Prime Minister Ishaq Dar, to discuss improving the country’s export earnings.
Pakistan’s former Ambassador to the World Trade Organisation, Dr Manzoor Ahmed, delivered a detailed presentation to the economic team. This meeting served as the basis for forming an 18-member committee to study the country’s tariff structure.
Two structural issues fall outside the committee’s scope. The committee will not investigate the change in the export tax regime outlined in the budget or the high energy costs compared to the rest of the area.
Exporters are currently confronting issues related to sales tax refunds and income tax, but no tax official from the Inland Revenue Service has been made part of the committee to address the exporter concerns. It shows that the committee will primarily focus on import tariffs, as proposed by the IMF, to progressively phase them down.
The caretaker government announced that export proceeds will surpass $100bn over the
following five years (2027-28). The commerce ministry projected an increase from numerous industries to meet this unrealistic target.
Soon after this declaration, a report from the International Monetary Fund (IMF) doubted Pakistan’s export targets by projecting statistics. In striking contrast to the ministry’s projections, the Fund expects Pakistan’s exports to progressively rise from $30.84bn in FY24, while actual export proceeds for the same year are slightly lower at $30.64bn.
The IMF export’s projections are $32.35bn in FY25, $34.68bn in FY26, $37.25bn in FY27, and $39.46bn in FY28. The export target for FY25 is projected at $32.3bn in the annual plan 2024-25. This target is likewise quite close to the IMF’s prediction.
According to the official, export earnings have grown by a single digit in recent years, and the projected export target is far from being met in the next three years. While the IMF bases its projections on nominal growth rates, the commerce ministry’s plan hinges on aggressive growth and a diversified export portfolio.
An official announcement from the commerce ministry said that Commerce Minister Jam Kamal chaired the committee’s inaugural meeting on tariff rationalisation. Recognising the task’s complexity and extensive scope, the minister established three subcommittees to expedite the process.
These subcommittees are tasked with providing detailed recommendations to the main committee, which will then present a finalized report to Prime Minister Shehbaz Sharif.
During the meeting, the commerce minister emphasised the technical nature of the subject and the need for comprehensive consultation with experts from both the private and public sectors.
The committee’s TORs include reviewing existing proposals, suggesting short to long-term tariff rationalisation measures, and devising a comprehensive plan to reach the export target. The ministry will finalise its recommendations within two weeks.
The committee will review the proposals/recommendations already developed by the National Tariff Commission/National Tariff Board and suggest tariff rationalisation measures and alternative revenue measures for achieving revenue targets.
Published in Dawn, July 16th, 2024