In a bid to achieve 7 percent GDP growth rate and facilitate the neglected sector of the economy, the federal government has decided to make bank financing mandatory for Small and Medium Enterprises (SME) sector. Finance Minister Ishaq Dar Wednesday addressing the business community at the Federation House, Karachi, said the State Bank of Pakistan (SBP) has been asked to make SME financing mandatory for banks to facilitate and promote one of the largest sectors of economy.
Previously, several financial institutions were set up to promote industrialisation in the country, but most of them like PICIC and NDFC have been closed down without proper planning. Therefore, SBP has been asked to come up with some aggressive measures including making SME financing mandatory to promote this sector, which can contribute largely in the growth of the economy, he added.
"We are moving towards long-term microeconomic growth and desire to achieve 7 percent GDP growth in next two years.....believing that without promotion of SME sector we can't meet this target," he maintained. Talking about the economic performance, Dar said the country's economy is now out of danger and on the path of stability. Recently, Pakistan has successfully completed the 9th IMF review, after which an amount of $500 million is likely to be released soon. Pakistan's fiscal deficit has reduced from 8.8 percent to 5.3 percent and will be 4.3 percent by the end of June 2016, he added.
In addition, with a 14 percent growth, the Federal Board of Revenue (FBR) collected Rs 821 billion revenue and received some $6.5 billion remittances sent by overseas Pakistan in first four months of this fiscal year. The country's forex reserves have reached about $20 billion and sufficient enough for four months' import bill, he observed.
Dar said Pakistan has become a favourite market for foreign investment and presently, investors from Saudi Arabia, Kuwait and Russia are looking for business opportunities in energy, oil and gas sectors. A 67-member Russian trade delegation is arriving on November 23-24 to explore the investment opportunities in the country," he added. "International credit rating agency and institutions are recognising the recent developments in Pakistan's economy and JETRO in its recent report has said that Pakistan is likely to be a second choice for foreign investment," the minister said and added that Pakistan still has potential to grow more and our economy will be world's 18th largest economy by 2050, if it grows with the current momentum.
Talking about tax reforms, Dar said the government is making serious efforts to enhance the tax base by inducting new taxpayers in the system without disturbing the business community. "Presently, some one million people are in the tax net and we want to take it to 6 million," he added.
Some 22 international institutions have accepted the developments in the country's economy and have a positive outlook for Pakistan, he said. The Minister Finance said that from the day one energy crisis is on top priority of the government and some 10,600 MW power will be added to the system by the end of March 2018, beyond this an additional 14,000 MW will be produced by 2020. Talking about the refund claims, Dar said refunds are being paid through a systematic process and its period will be further reduced in coming days.
He said the government is striving to promote Islamic banking in the country and as part of these efforts, the All Shares Islamic Index of Pakistan (ASIIP) at Karachi Stock Exchange (KSE) has been launched on Wednesday. The 12th meeting of the steering committee on Islamic banking was also held at SBP to review the efforts towards Riba-free banking. The steering committee report on Shariah compliance is almost at the final stages and will be launched soon, he added.
Ashraf Mehmood Wathra, governor SBP, said the SME sector is already on top priority list of the SBP and included in Export Refinance Scheme, under which financing is provided at 6 percent. The SBP will take further measures to encourage the SME sector, he added. He said Pakistan's economy is growing well and inflationary pressure has eased during the last few years. "We are expecting 4 percent inflation by the end of this fiscal year," the governor SBP said.
Nisar Ahmed Khan Chairman FBR, Saeed Ahmed Deputy Governor SBP, Riaz Riazuddin Deputy Governor SBP, Mian Idrees President Federation Pakistan Chamber of Commerce and Industry, S M Muneer, CEO of TDAP, Dr Mirza Ikhtiar Baig, Chairman Standing Committee on Banking Credit and Finance FPCCI were also present.