Published Date: Jan 12, 2014
Privatisation process to be good litmus test, Dar told
Finance Minister Ishaq Dar has reportedly sought the help of Economic Advisory Council (EAC) to deal with the prevailing economic challenges after members of the newly-constituted Council underlined the need for greater transparency in the privatisation process and broadening of tax base to mobilise resources. The EAC members reportedly said the planned privatisation of State-Owned Enterprises (SOEs) would be a litmus test for the government as everyone would be closely watching how the process
would be carried out.
Sources said the Finance Minister briefed the meeting about the problems in appointments of heads of public-sector organisations, issues
in power sector as well as financial and capacity constraints in the public sector. On the issue of inflation, they quoted Finance Minister as saying that the government had already provided a subsidy of over Rs 17 billion on petroleum products and financial constraints did not allow
it to continue doing so.
The minister also dispelled the impression that the arrest of rupee slide was the result of government intervention, saying that no foreign exchange cushion was available to the regulator to intervene in the market. Dar held speculators responsible for depreciation of Pak currency and stated that one must comment on the issue in a responsible manner because of its sensitivity. The meeting agreed with the viewpoint
of the Finance Minister. Some members of the Council reportedly stressed the need to rationalise SROs to do away with concessions and exemptions to mobilise revenue.
The minister briefed the members about the state of economy inherited by the PML-N government and where it was standing after six months and what is the way forward. Dar said he was optimistic that reactivation of EAC would prove to be a useful forum and help devise policies to bring the country out of current economic problems. He added
that the Ministry of Finance was open to their suggestions to turn Pakistan ‘s economy around.
According to a statement issued after the meeting, the Council after thorough deliberations decided that it would identify certain critical sectors and areas where its input could help the government formulate policies. In this connection, EAC identified power sector, exploration of natural resources, agriculture, social sector, resource mobilisation, public sector disinvestment and foreign remittances as areas where its expertise could be utilised.
Dar said tapping of natural resources and mobilisation of resources was the way forward and the government was proactively working
on both counts. He said the government believed in transparency and therefore it had constituted an autonomous body called the Pakistan Bureau of Statistics (PBS) so that authenticity of economic figures could be ensured. The government, he said, would take all the required steps to strengthen the PBS and welcome suggestions to achieve credible economic data.
Similarly, the decision to release quarterly accounts as well as
rebasing of accounts every 10 years has been taken with a view to ensuring transparency in monetary and fiscal sides, according to Dar. Dilating on economic woes inherited by PML-N government, he said the projected deficit last fiscal year was reduced from 8.8 percent to 8.2 percent with prudent fiscal management by the PML (N) government which was further brought down to 8 percent through provincial surpluses.
Another challenge for the new government was the clearance of circular debt which was resolved as it was legally, commercially and ethically binding on the government since it was a contractual obligation. It led to add 1,700MW to the national grid and helped increase generation up to 14,500MW, reducing load shedding considerably as well as increasing industrial production which in turn helped achieve
5 percent growth in the first quarter.
The Finance Minister said the economic situation inherited by the PML(N) government had left no option for it but to approach the IMF as external inflows had dried up due to failure on the part of the previous government to abide by Stand-By Arrangement (SBA) agreed with the IMF. The IMF diligence helped the government re-engage with international institutions. There is no harm to borrow and create assets; but it is certainly bad if it is used for current expenditures, according to him.
Announcing that the IMF team is expected in the end of this month, he told the Council that the International Finance Corporation (IFC) and other international commercial banks and organisations were approaching the government and he was confident that Pakistan ‘s foreign exchange reserves would reach $16 billion by December 31, 2014. According to him, remittances have shown an increase of 9 percent to $7.78 billion while exports increased to $12.64 billion showing an increase of 5 percent this year. Commercial banks had increased credit to the private sector to Rs 250 billion against Rs 73 billion, which reflected a significant increase in economic activity; similarly, revenue collection had shown a growth of 17 percent in the last 5 months
as compared to the same period last year.
The Finance Minister said the government was undertaking reforms
“which are sometimes painful”. It is also working on a policy to tap hydrocarbon resources as there are reports of proven reserves, according
to him. Dr Ashfaque H Khan appreciated the government decision for publishing a tax directory. He suggested strengthening of PBS through its capacity building. Dr Farrukh Saleem appreciated the endeavours of the government to manage budget deficit which he termed the cause of our
economic malaise. Supporting the government ‘s policy of disinvestment of Public Sector Entities (PSEs), he suggested a communication strategy for public awareness in order to dispel any misperception.
According to Farrukh, the way the auction of spectrum license is
to be carried out would set the pace for planned disinvestment by the government. Arshad A. Zuberi suggested that the government should appoint a top professional to manage country ‘s debt and encourage construction industry to create new job opportunities on a large-scale. Abid Qayyum Suleri appreciated the decision of the Finance Minister to allot NTN numbers to parliamentarians and offered to make a presentation
on shale gas prospects in the country. Razzaq Dawood emphasised the need for formulating a comprehensive policy to boost exports which, according to him, was the solution to our economic problems. Farooq Rehmatullah offered to make a presentation on country ‘s hydrocarbon potential in the next EAC meeting. It was decided that the next meeting of the EAC would be held in the 2nd weak of February.
The meeting was also attended by Abid Hussain, Shahid Hafeez Kardar, Saqib Sherani, Miftah Ismail, Chairman, Board of Investment, Yaseen Anwar, Governor State Bank of Pakistan, Qazi Azmat Essa, CEO, Poverty Alleviation Fund, Secretary Finance Dr Waqar Masood, Advisor Finance Rana Asad Amin and senior officials of the Ministry of Finance.