Tarin outlines macro-economic policies

GDP growth of 4.4 percent in the current fiscal year, 5 percent in 2009-10 and 5.5 percent in 2010-11 was forecast by Prime Minister's Advisor on Finance Shaukat Tarin while addressing development partners during a consultative workshop to review the drafts of Poverty Reduction Strategy Paper-II and Medium Term Policy Framework (MTPF) 2008-09 to 2010-11.
With regard to fiscal policy, he said that the government would focus on expenditure control, elimination of subsidies, automatic price adjustment for petroleum products and electricity, and institutionalisation of MTPF. In the MTPF, the government has pledged that it would raise tax-to-GDP ratio from less than 10 percent to 15 percent by the end of 2012-13 through a combination of elimination of exemptions, strengthening of federal tax administration, improved enforcement and removal of distortions in the tax system.
According to the drafts, the government would make efforts to bring down public debt, as percentage of GDP, by 2.5 percent per annum with effect from 2009-10. Public guarantees would be kept to 2 percent, or below, per annum; whereas savings as percentage of GDP were forecast at 13.1 in 2008-09, 15.1 in 2009-10 and 16.7 in 2010-11.
Investment to GDP is expected to be 19.5 percent in 2008-09, 20 percent in 2009-10 and 21 per cent in 2010-11. Inflation has been projected at 22 percent in 2008-09, followed by 13 percent in 2009-10, and 9.5 percent in 2010-11, while growth target in money supply (M2) has been forecast at 10.6 percent in current fiscal year and 15.9 percent in 2009-10.
Forex reserves with the SBP have been estimated at $8.5 billion in the current fiscal year, $9.1 billion in 2009-10 and $10.3 billion in 2010-11. He said: "We have planned to bring down inflation to less than 10 percent, scale down fiscal and current account deficit, besides paying special attention to mobilisation of additional internal resources."
Tarin said total allocations for the Benazir Income Support Program (BISP) for the fiscal year 2008-09 is Rs 43 billion which would be enhanced to Rs 50 billion. "This is unlikely to alleviate poverty, but will serve to protect nutrition intake to a large extent," the MTPF documents claimed.
He said that there was an urgent need to develop an integrated energy generation and conservation plan in a manner that could boost agriculture, industry and other production sectors. The capital market needs to be strengthened.
Banking sector's participation in overall economic development and support to the small investors merits special attention, he said. He further said that infrastructure development on nation-wide basis "is a priority", and the government was making all out efforts to create a social safety net to protect the vulnerable groups of population through extending outreach of BISP, that needs to incorporate comprehensive transparency while covering the poor sections of society.
He said: "GoP is putting in place 20 years development rolling plan with prefixed goals which also contains six quarters' rolling forecast in terms of best possible economic planning and development. Planning Commission has been geared up for this objective. A Policy Board is being formed to implement the decisions.
"We are working towards stabilisation of macro-economic indicators and all our initiatives are likely to be in place by end January 2009." He said the problem of circular debt needs to be dealt with through instituting special fiscal measures.
Tarin said GoP is prioritising all PSDP projects at federal, provincial and local levels. The programme audit of all PSDP projects by internationally recognised agencies in an effort to streamline expenditure and rationalise the development projects would be put in place.
"What GoP would stress is that all development projects must have a pilot project to ensure success of subsequent full cycle projects," he added. He also stressed need for development of agriculture and industrial sectors which have not yet shown progress in accordance with expectations.