EJAZ WASTI - I had the chance to read Omer Zaheer’s article “IMF-driven policies destroying economy” carried by The Nation on March 16. It has prompted me to say a few words to put the record straight.

The writer claimed that “Pakistan is going through an economic slump; some would even argue a meltdown. With rampant lawlessness, terrorism, rising inflation and severe electricity and gas load management especially for industry, the economy is in dire need of a revival”. The writer has also criticized power sector mismanagement.

Omer seems to have ignored the positive economic developments which have been appreciated by international financial institutions. He also seems to be unaware of the fact that Finance Minister in his media talks has often elaborated on the reforms agenda for the revival of economy.

First and foremost all the economic indicators are moving in the right direction, which clearly indicate economy is on the path of recovery. The fact that after a lapse of 3 years Pakistan has qualified for availing IBRD funding facility clearly reflects our efforts to improve the reserves position and the economy in general.

The writer should at least have a cursory look at the economic indicators. No denying the fact that CPI has been contained to single digit at 8.6 per cent during FY14 despite adjustments. Current fiscal year started with single digit inflation and this trend is continued. All inflation indicators are on downward trajectory. During February 2015 inflation reached to 15 years low at 3.2 per cent on account of effective monetary policy, prudent expenditure management, vigilant monitoring and smooth supply of commodities both at federal and provincial level coupled with the global decline in oil and commodity prices. It is worth mentioning that compared with peer economies, the benefit of reduced international oil prices was passed on to consumers in Pakistan to a far greater extent.

Other indicators are also showing constant improvement. WPI is negative which indicates that inflation will be further contained. On the basis of these positive developments, international financial institutions have also scaled down its projections for inflation. This continuous decline in inflationary pressures proved author’s claim baseless that IMF measures led to unbearable levels of inflation.

Regarding broadening of tax base, several initiatives have been taken and some are in pipeline. Initially the objective is to bring about 300,000 new taxpayers in the tax net. In this regard 125,000 notices have been issued in 2013-14 and more notices will be issued in the current and next financial years to achieve the goal. Similarly, a detailed outreach program including provisional assessment, collection procedures, penal actions and prosecution proceedings has been chalked out. In order to remove distortions and discrimination in tax structure and to abolish unnecessary concessions, a program for tariff rationalization and SROs reduction is underway. FBR has devised a plan for rationalization of concessionary regime and withdrawal of exemptions. The first tranche of exemptions has already been withdrawn in the Budget 2014-15.

Regarding the writer’s views on power sector mismanagement, the writer may be mindful that the current government has rationalized tariffs. Subsidies are targeted towards the vulnerable consumers in the residential and agriculture categories. Further, the benefits of reduction in oil prices have been passed on to all the consumers which have resulted in a significant relief.

The current government inherited an amount of Rs.480 billion in circular debt. The government came up with the best possible solution to resuscitate the then chocking power sector in the country and went through successful negotiations with the power producers and rescued them from a liquidity crunch. Resultantly, these power producers withdrew their claims for invoking sovereign government guarantees and agreed to invest in new technologies such as conversion to coal based plants which will substantially decrease the cost of electricity production. Moreover, 1,700MW were added to the power system as a result of these negotiations.

It is noteworthy to mention here that the payments were made against the claims verified by the Ministry of Water and Power. In addition, a forensic audit was conducted externally as well by an international audit firm wherein no discrepancies were found.

The current government has developed a National Power Policy 2013-18 in consultation with all stakeholders and the same stands approved by the Council of Common Interests (CCI). The Policy is aimed at overcoming the present energy crisis and meeting the future power demands. Under the Policy, a mechanism is being finalized to keep the overdue payments below an indicative ceiling and gradually set them on a declining path. The mechanism includes feeder-to-feeder monitoring, reducing line losses, improving collection, revenue-based load management, shifting to multi-year tariff and expediting policy decisions on subsidy, tariff and non-payment.

The government is also pursuing demand side management. To promote efficient usage of power and implementation of energy efficiency codes, Pakistan Energy Efficiency and Conservation Act has been presented to the Cabinet for approval.

The author conveniently missed PESCO, QESCO, SEPCO, HESCO, Jamshoro Power Company Limited (JPCL) in the list of power companies lined up for privatization. Request for Expression of Interest for the hiring of Financial Advisors for these entities is already published in the local newspapers.

The government is putting up great efforts to create an independent CPPA in order to promote transparent financial management in the power sector. Furthermore, information such as payable monthly amounts, payments by the DISCOs to CPPA, and by CPPA to the generators will be made available on the website of CPPA.

The writer is Economic Advisor, Ministry of Finance.