With reference to fiscal policy, he stated that additional taxes on a number of small and medium enterprises notably leather, surgical goods, have further negatively impacted on productivity.
He added that incentives were provided to the industry in last year's two mini-budgets and especially in the second one, incentives were granted to the industry but the government has increased taxes in the current fiscal year in various industrial sectors including cement, sugar, vegetable ghee, iron and others, which was inappropriate with visible danger that these may hinder industrial output.
He deplored that 70 percent of the total additional tax collection of Rs 1.7 trillion would be through indirect taxes in ongoing fiscal year which would not be a good omen for the industrial growth. There has already been a decline of 40 percent in automobile production and a number of employees are being laid off and eventually a number of units may face shutdown owing to lack of capacity to repay their loans consequent to increase in servicing cost.
He said that SMEs sector is export-oriented and has long been strength of the country; however, for the last few years it has also been facing considerable decline in its exports particularly of surgical goods, cutlery, etc, in last five years.
Hafeez Pasha said that Pakistan's Large-Scale Manufacturing (LSM) production was contracted by 3.5 percent last fiscal year and it has been heavily burdened by the taxation measures introduced by the government.
Pakistan exports surgical instruments all over the world but unfortunately there has been considerable decline in its exports during the last few years. The decline has not been limited to industrial sector as construction, mining and agriculture sectors have also gone down.
The fiscal side has gone from bad to worse; however, there is a good news of some decrease in current account deficit but there is inconsistency in numbers of trade deficit of those released by the Pakistan Bureau of Statistics (PBS) for the month of July 2019 noted a decline of 19 percent while those of State Bank of Pakistan reported 47 percent decline in trade deficit.
There has been increase in unemployment and poverty as well as lack of increase in capacity of textile sector, he said and urged the government to give monetary and fiscal policy after serious consideration to reduce the unemployment and poverty.
Pasha said that last fiscal year's deficit has proven all the base numbers of the IMF programme inaccurate and now as there is no space for increase in revenue, Fund may put emphasis on cutting expenditure. There is a space of between Rs 500-600 billion reduction in government expenditure side, he pointed out.