ISLAMABAD - Prime Minister Nawaz Sharif on Wednesday reiterated his pledge to overcome energy crisis as soon as possible, besides reviving the deteriorating economy of the country, in a bid to give hope to a nation caught in a quagmire.
Chairing a special cabinet meeting, the PM said the country was facing energy crisis mainly due to the wrong policies of the previous governments. However, he said his government is working to bring reforms in the power sector, reduce line losses and improve the electricity distribution system. He said government has also launched several new projects to produce cheap electricity from coal, wind, hydel and solar resources.
Defending the IMF programme, the prime minister held the previous government was responsible for the situation wherein they have been forced to enter in a new loan programme of the International Monetary Fund. He said that public debt has been increased due to the rupee deprecation against the dollar.
However, he hoped that economic situation would improve very soon. Pakistan would come out of IMF programme as it happened in the era of 1990. He said that Japan International Cooperation Agency had committed to fund Karachi Circular Railway project, as JICA would provide up to two billion dollars for the project.
Giving a comprehensive briefing about the state of economy to the Cabinet meeting and TV anchorpersons here on Wednesday, Finance Minister Senator Ishaq Dar said that the fiscal deficit has been brought down to 8%, foreign exchange reserves would be taken to $16 billion by the end of 2014 and power generation would go up to 36,000MW by the end of the tenure of the government.
The minister said the price hike is a matter of great concern and the major factors behind it were increase in oil prices, revenue shortfall and profiteers and hoarders. He said it were actually the provincial governments which are responsible for this state of affair as they have failed in checking hoarding and profiteering by vested interests. He said they plan to strengthen the magistracy system to nab those indulging in profiteering. He claimed that there was no problem in supply system.
Dar also defended the government’s move to approach IMF for new loan programme, as he said, “Pakistan had no choice but to borrow new money to pay off instalments of old debts “. He said other developmental partners like WB, ADB, IDB, OPIC, IFC, JICA and others would never approach Pakistan for financing of development projects like Dasu, Jamshoro, Neelum Jhelum and Karachi Circular Railway if Pakistan did not enter into IMF programme, he added.
The minister claimed that new IMF loan would not increase the overall volume of the public debt, as it is only to repay the previous one. The government has not signed the new programme on IMF’s dictation rather it followed its party election manifesto, he maintained.
The finance minister also dispelled the impression that government has printed new notes to clear the circular debt worth of Rs480 billion. He informed that the government had auctioned bonds and reduced its expenditures to clear the debt, which helped in generating additional electricity of 1700MW. Talking about printing new notes, Dar said that net issuances of the notes are only Rs 206 billion during five months (July-November) of the current fiscal year, as central bank printed new notes worth of Rs672 billion and later government had deposited Rs 466 billion.
Dar said Pakistan’s foreign exchange reserves would accelerate to $16.021 billion by the end of current year 2014, as country is expecting to receive $10.095 billion from different sources. He said The World Bank (WB) would provide one billion dollars, Asian Development Bank (ADB) $400 million, commercial banks $425 million and Islamic Development Bank (IDB) $730 million. He said the government would get one billion dollars from Global Rupee bond, one billion dollars from euro bond floatation, one billion dollars from remittances-based bond floatation, $800 million from Etisalat and $1.2 billion by auctioning of spectrum licenses and $1.54 billion from United States under coalition support fund (CSF).
Finance Minister said that government has allocated Rs220 billion subsidy in the budget for the power sector, wherein Rs131 billion has been released so far. He admitted that recoveries of the distribution companies have been considerably reduced, which resulted in corporate debt worth of Rs225 billion. The minister said through GSP Plus status, exports of the country were expected to increase by 1.5 to 2 billion dollars.
Talking about the soaring inflation, Ishaq Dar said that it is cause of serious concerns and held previous two governments of PPP and interim responsible for it apart from higher international oil prices. The previous two governments were supposed to take decision like power tariff hike, clearance of circular debt, shortfall in taxes and imposition of new taxes, which increased the inflation rate in the country, he added. Similarly, the minister said he would propose a constitutional amendment to make it binding on the caretaker government to clear the backlog of decision-making of the previous government before transferring power to a new elected government.
with a clean slate to put the responsibility where it belonged.
He claimed that the caretaker government had given a commitment to the IMF in April to impose Rs200bn of fresh taxes and the summary had been submitted to the president, but a decision was not taken. Likewise, the international lenders were given an assurance about an increase in electricity tariff by Rs6 per unit and even a summary was also moved but then shelved. Then they promised to collect Rs2,050bn taxes, which ended up at Rs1,936bn.
Talking about the current economic situation, Ishaq Dar claimed that macroeconomic indicators have performed well in the so far period of the current fiscal year. He informed that country’s GDP growth has been recorded at 5 percent during the first quarter (July-September) of the current financial year 2013-2014, which was only 2.9 percent in the corresponding period.
The government is committed to take GDP growth rate to 7 to 8 percent in next few years, he added.
He informed that budget deficit has recorded at Rs570 billion (2.2 percent of the GDP) during first quarter of the ongoing fiscal year, which was Rs690 billion (2.9 percent of the GDP) of last year. He said that revenue collection has shown growth of 17 percent, as FBR collected Rs 792 billion during first five months (July-November) of the present financial year, which was Rs 679 billion in last year. He also informed about the economic performance of the previous PPP led government in its five years tenure. The public debt increased to Rs 14.36 trillion on June 30 2013, debt to GDP ration enhanced to 62.7 percent, fiscal deficit close to 8.8 percent of the GDP and tax to GDP ration declined to 8.5 percent.