$4 billion IMF aid to be sought if FoDP's pledges delayed

Monday, June 15, 2009

ISLAMABAD: The Advisor to Prime Minister on Finance, Shaukat Tarin, said on Sunday that in case of any delay in receipts of pledges from Friends of Democratic Pakistan (FODP) Pakistan has lined up commitment of $4 billion from the International Monetary Fund (IMF).

Addressing the post-budget news conference here, he said that FODP forum has been requested to give money for social sectors so that the growth-oriented policy could be pursued and implemented in true spirit through financial resources available with the country. He said that the World Bank, the Asian Development Bank, and Islamic Development Bank (IDB) would give $4.80 billion in the next two years. An assistance of $5.80 billion is expected from FODP forum in the same period.

"After achieving targets of economic stabilisation plan, the economy is poised to go for sustainable, equitable and job creating growth. The current account deficit and fiscal deficit are well under control.

The budget 2009-10 is focused on agriculture and manufacturing with agenda of enhancing productivity level through improvements to human capital base and physical infrastructure and ensure availability of cost effective energy in the country.

Shaukat said that during 2008-09 the response of this government was phasing out of the subsidies and sustaining the budgetary resources. He said that the expenditures were rationalised through a process of prioritisation of government development schemes to reduce budget deficit.

He said in this regard development expenditures were reduced and went down by Rs 120 billion. He added that SBP followed a tight monetary policy to reduce the aggregate demand and to bring down inflation. There were adjustments in petroleum prices and electricity prices to reduce burden on the budget, he added.

He said that net borrowing from SBP as of October was Rs 252 billion to Rs 258 billion. "By March it had been reduced to Rs 58 billion, which means we have started paying back to the SBP rather taking from it".

He said that import of non-essential items was curtailed by tariff adjustments to reduce the trade and current account deficits. He said that fiscal deficit has remained on target which means it has come down from 7.6 percent in 2007-08 to 4.3 percent in 2008-09. He said that current account deficit has been reduced from 8.5 percent to 5.3 percent of GDP, again a reduction of 3.2 percent in one year.

"Our tax and duty measures in Budget for Fiscal Year 2009-10 would revolve around providing protection to the poor and vulnerable against the current economic downturn by providing cash transfers and skill development, reviving manufacturing and industry, especially export-oriented industry, to raise their productive levels, broadening the tax base, instead of overburdening the existing taxpayers, and restraining unnecessary imports to improve the Balance of Payments position."

Tarin told a questioner that budgetary deficit will be around 3.4 percent during next fiscal year. Non-productive subsidies are being done away with this year, he said, adding that foreign exchange reserves stood at $11.30 billion while Gross Domestic Product valued Rs 14.82 trillion.

Responding to a query about entitlement of 15 percent ad hoc relief with regard to regular, contract and daily wage employees of the government and semi-government corporations, the Advisor said that all those who were getting their salaries from the national exchequer will be entitled to ad hoc relief. He said that levying carbon surcharge on POL products is a permanent feature and to help cut demand. "This will remain intact," he reiterated.

He said that the government would soon complete the National Finance Commission (NFC) Award within the next three months. This will help fair distribution of national resources between Centre and provinces. Tarin said that there was no jugglery of figures in the budget. "The Federal Budget 2009-10 is an open document. We have placed all our budget documents in the media cell of Ministry of Finance to maintain transparency," he added.

The government would pass on to the consumers impact in case oil prices increase along with rates of carbon surcharge on POL products. Although the government has imposed carbon surcharge on CNG, it would remain 35 percent cheaper than POL products and the aim of the government is to ensure use of gas resources wisely.

"Earlier, the CNG price was 58 percent of the POL products prices and now we have raised it from 58 percent of POL products prices to 65 percent of the POL products prices," he said.

The government would collect Rs 134 billion from carbon surcharge on POL products and carbon surcharge on CNG imposed in the budget 2009-10. Rs 122 billion would be collected from carbon surcharge on POL products and Rs 12 billion from carbon surcharge on CNG in next fiscal year 2009-10. Carbon surcharge on POL products will be Rs 8 per litre on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (petrol), Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil, and Rs 6 per kg on CNG.

He said that out of $1.5 billion Kerry Lugar Bill aid to be received from United States, $1 billion or Rs 80 billion would be spent in terrorism affected 25 percent districts of NWFP, Balochistan and Punjab during 2009-10.

He said NFC issue has been discussed in the special Cabinet meeting and Prime Minister would soon re-constitute Commission to hold detailed negotiations with provinces. Issue of arrears of Net Hydel Profits of NWFP against Wapda would also be discussed during NFC Award negotiations.

He said that power tariff increase would be made in case it was necessary, in gradual manner but not in one go. He hinted that the government would not pass on to the consumers the inefficiencies of public sector entities that are wasting Rs 150 to Rs 200 billion due to their inefficiencies. The government would reduce the line losses of distribution companies to keep the power tariff at reasonable level.

He clarified that Rs 19.4 billion that has been indicated income from privatisation in 2009-10 would mainly come from $700 million remaining PTCL privatisation proceeds that were held up due to the dispute over assets in provinces. He said that the issue has been resolved with the provinces and Etisalat will release to Pakistan the remaining privatisation proceeds soon.


(BRecorder)