WEDNESDAY JANUARY 26: Monetization of fiscal deficit stoking inflation: briefing to political leadership

ISLAMABAD: The Ministry of Finance is reported to have informed the political leadership that fiscal deficit is feared to go over 8 to 8.4 per cent, Rs 1,500 billion, for the current fiscal year, it was reliably learnt. Sources said that high-ups of finance ministry during the briefing to the leadership of various political parties on economic situation reported to have said that defence budget is expected to go up by Rs 100 billion due to war on terrorism.
An increase of Rs 30 billion is likely in the budget of Pakistan Railways and monetization of fiscal deficit was spiking inflation. The overall growth is likely to be around 2.5 per cent as a result of floods and its impact on various sectors of the economy. The manufacturing sector and major crops except wheat have been badly affected and total output for cotton has been scaled down to 11.6 billion bales. The damage to the cotton and rice crops may diminish growth of agriculture sector by one per cent in the current fiscal year.
On Tuesday, Parliamentary Committee constituted by the Prime Minister headed by Finance Minister Dr Abdul Hafeez Sheikh briefed leaders of different political parties including Pakistan Muslim League (Functional), senators of Muttahida Majlis-i-Amal (MMA) and members from FATA.
They were given a detailed briefing on the current economic situation of the country and apprised of the various measures the government is taking to improve the economy of the country. Later talking to media, finance minister and secretary finance claimed budget deficit was estimated at 3.2 to 3.3 per cent for the first six months of current fiscal but various measures taken by the government have helped contain it below 3 per cent. However, the Minister neither taken any question from media nor did he explain various measures that help contain the fiscal deficit. He said that the exports are likely to go over $20 billion mark and may even touch $22 billion. The remittances are expected to cross $10 billion for the first time in history and foreign exchange reserves of $17 billion are unprecedentedly high. The Minister said that some measures are needed to be put in place to contain the fiscal deficit within reasonable limit, otherwise it may go up to 8 per cent. The government would not allow this to happen and take action for fiscal management.
Dr Abdul Hafeez Sheikh said that process of consultation with political leadership to build consensus on some of the measures to fix the economy is going on and hopefully would yield positive results. The economic team, he said informed the political leadership about the real situation of the economy in a very transparent way and nothing was concealed from them.
Senator Professor Khurshid Ahmed said a bleak situation of the economy was painted by the presentation given by the economic team as apart from export, remittances and wheat production, all other sectors including services have been on decline. The massive increase in expenditure and shortfall in revenue would increase the budget deficit to over 8 per cent if policies were not changed and corruption, massive leakage, tax evasion and nepotism in appointments were not checked. We have asked the government to reduce expenditure by 30 to 50 percent, and take measure to minimise the line losses of over 35 percent in power sector.
The delegation comprised Senator Professor Khurshid Ahmed of Jamaat-i-Islami, Jehangir Khan Tareen MNA, Munir Khan Orakzai, MNA, Maulvi Asmatullah MNA, Senator Mohammad Ghufran Khan, Senator Abdur Razzaq and Senator Wali Mohammad Badani.