Islamabad - Finance Minister Senator Ishaq Dar on Tuesday said that Pakistan’s successful negotiations with International Monetary Fund (IMF) has had a positive impact on the national and international markets, as international financial institutions, banks and multinational institutions are approaching Islamabad for assistance.
The conclusion of a programme with IMF has sent a signal that an international institution considers the policies, plans and measures of the Government of Pakistan as indicative of its confidence in the economic future of Pakistan, he said.
He was talking to a delegation comprising heads of Missions of European Union Members including Austria, Belgium, Bulgaria, Czeckk Republic, Denmark, France, Germany, Greece, Hungary, Italy, Poland, Portugal, Romania, Spain, Sweden and United Kingdom, who met Finance Minister Senator Ishaq at his office. The delegation was given an overview on the economic plan of the present government to revive the economy.
Dar briefed the delegation that government accords top most priority to construction of water reservoirs and shall focus all its attention to rally finances for construction of Diamer Basha Dam. He said during a short span of one month the budget has been presented and passed, the issue of circular debt has been addressed and Pakistan has successfully negotiated a program with IMF.
Ishaq Dar said that the future of Pakistan’s economy lies in resource mobilization and revenue generation. He said that total debt inherited by this government stood at nearly Rs.14.5 trillion and the previous government during the last year alone borrowed Rs.2 trillion for financing non-development expenditure and tariff differential. The budget envisages 30% cut in non-salary expenditure as part of its austerity plan, abolishing of all secret funds and a 25% increase in revenue targets for next year.
Dilating on the salient features of the budget, the Finance Minister said that PSDP has been increased by 50% from Rs.360 billion to Rs.540 billion while allocation for social safety network programme has been increased by 87.5% from Rs.40 billion to Rs.75 billion. The budget, the Finance Minister said, envisages taxation measures which are estimated to yield Rs.207 billion while another Rs.300 billion would be mopped up through measures like IT connectivity, good governance, expansion of tax net, removal of SROs and plugging of leakages.
The FBR has been provided access to bank accounts. To ensure that this authority is not misused, fine has been increased by ten times along with imprisonment to give comfort to parliamentarians and businessmen that this power would not be abused. Protection of the poor has been kept in mind by announcing tax measures.
Federal Minister said that the next challenge faced by the government was to pay circular debt of $5 billion. Ideally the previous government or the caretaker set up should have taken care of circular debt. We have paid $3.2 billion to private power producers and intend to settle the balance of $1.8 billion preferably by end of this month.
The Federal Minister said that Pakistan is committed to all its international obligations and our negotiations with IMF were designed to achieve this objective. We were successful to bring out closure with IMF by 3rd July. The Finance Minister urged the EU Heads of Missions to extend their support by using their influence on the directors with Board of IMF.
Finance Minister said that the measures agreed with IMF are in line with Pakistan’s national interests and commitment made by PML(N) in its manifesto.
The Federal Minister said that it is imprudent to borrow money and to spend it on non-development expenditures while there is no harm if it is spent on projects which add value. Giving example of prudent use of money, he said that Lahore Islamabad Motorway was constructed at cost of Rs.21 billion, which is now valued by international surveyors at Rs.250 billion.
Finance Minister also informed the EU Heads of Missions that owing to deferring of tariff rationalization by the previous government due to political expediency, by previous governments, the present government was now faced with a situation “to take one of the most painful decisions of tariff rationalization”.
Ambassador Lars-Gunnar Wigemark said that European Union supports the present government of Mian Nawaz Sharif and welcomes the initiatives taken by this government as positive and in the right direction. The EU, he said, would extend all technical assistance and support to the government of Pakistan in its efforts to revive the economy, create good governance, rule of law and welfare of the people.
Ambassador Lars-Gunnar Wigemark in response to Finance Minister’s briefing said that he was grateful to the Finance Minister for having given a comprehensive briefing on state of economy of Pakistan.
Ambassador Lars-Gunnar congratulated the Finance Minister on strong performance shown by PML-N in the election and assured of its continued support for democracy and good governance in Pakistan.
In response to a question that the PML-N government was giving lesser priority to Human rights, the Finance Minister said that the government had decided to reduce the number of ministries and work with a smaller cabinet whose present strength of 28 ministries is far below the 49 members permitted by the constitution. The clubbbing of Human Rights division should not be read as lack of any determination on part of this government to uphold human rights, “there shall be no compromise on human rights”, he assured.
Addressing fears of recurrence of circular debt raised by some Ambassadors, the Finance Minister said that he understands the implications of circular debt and has suffered the pains the government has undergone in clearing the earlier circular debt, “I have had sleepless nights”. We have now made budgetary provisions in addition to certain other measures to ensure that the circular debt does not recur again.
The Finance Minister said that one of the aspects of energy problems was the present energy mix which was now 75% dependent on furnace oil. The new energy policy, scheduled to be announced by the Prime Minister, envisages energy projects based on low cost fuels so that affordable and cheaper energy could be provided to the consumers, he added.
The Finance Minister said that Pakistan is presently passing through a critical period where macro-economic imbalances are being addressed. Once these are addressed, it will provide fiscal space to the government to give relief in taxes to the industry as well as relief to the people.
The Federal Minister also dilated on the micro-finance programme initiated by last PML-N government in 1998 when he was Finance Minister and informed EU Heads of Missions that it was now reaching out to 2.5 million families. The government, he said, estimates that 7.5 million families are deserving of micro-finance assistance. One area, the government would like to address is the mark up rate which is presently 20%. However, it is satisfying that the infected portfolio is only 3.6%.
To a question regarding the fiscal deficit, the Finance Minister said that his government inherited a 8.8% fiscal deficit which will be reduced to 6.3% in the coming budget what MTF envisages to reduce further to 4%.