Shamshad describes C/A as major challenge

Caretaker Finance Minister Dr Shamshad Akhtar said on Tuesday that Pakistan is faced with difficult situation on external account and the government is looking at options, other than the International Monetary Fund (IMF), to meet looming debt obligations. While speaking at a joint press conference with Minister for Information and Power Syed Ali Zafar, she said that "there are very serious macroeconomic challenges this country is facing" but the caretaker setup will not enter into any negotiations with IMF because it is not its mandate. "Our job is to make sure we don't default on payment of debt," added the minister.
She said that debt repayment obligation will be met and the caretaker government is looking at an alternative arrangement. "We have looked at the matter of macroeconomic situation in the cabinet meeting and will continue to reflect how to resolve macroeconomic challenges on the short-term," she said.
The minister identified current account deficit as one of the major challenges and stated that it has already caused a slippage of 1.6 percent by the target subsequent to $14 billion deficit.
The minister said that growth in exports for various factors has not been sufficient to finance the trade deficit and consequently foreign exchange reserves have been depleting at much faster pace. She said now the exports are showing growth but import bill of double the size of exports is continuing to be a source of concern.
Another challenge is on fiscal deficit that has already crossed 6.1 percent of GDP against the target of 4.1 percent for the entire fiscal year and there is no idea at what number the fiscal year will close.
She said that FBR number already reflects a shortfall but precise determination of revenue shortfall at this stage is not possible. She also mentioned continuation of export subsidy on revenue impact and another Rs 40 billion on account of court order with respect to mobile taxes. She said there are also slippages on expenditures side as well.
The minister identified rising and unsustainable public debt to GDP of 70 percent in 2018 compared to 64 percent in 2013 and not in consistent with the FRDL Act 2015. She said that public sector enterprises (PSEs) are another challenge; however, the caretakers are constrained as it requires long-term measures.
Replying to a question that foreign exchange rate was maintained at a specific level by the former Finance Minister Ishaq Dar, she said that this policy is not sustainable because "if you want to stabilize exchange rate for long term, this can be done by the foreign exchange reserves injection in the inter-bank market, which is not sustainable." She said, "Let the exchange rate be determined by the marker forces; we should not intervene in the inter-bank market."
The minister said the GDP growth remained very strong as it is broad-based. She said every sector, including agriculture and services, made a substantial growth, and there was massive investment in the country.
Shamshad said that recent increase in oil prices is linked to the rise in prices of petroleum products in international market and the government passed on 50 percent impact to the consumer. The impact of oil prices on fiscal deficit was quite significant which led the caretaker government to pass on partial impact to the consumers. Oil prices in Pakistan are still lower as compared to the neighboring countries of the region, added the minister.
The minister for power said that there is a significant gap among power generation, transmission, and distribution of electricity which choked the system, causing adverse load shedding.
The minister said that currently 21,000 to 22,000 megawatts of electricity is being produced against the demand of 23,000 to 24,000 MW, causing a shortfall of 2,000MW. Whereby, the country has a total installed capacity of 28,000MW production, he added. The supply and demand gap remained around 2,000-3,000MW during this period of May 2018.
However, he said, the causes of load-shedding observed early this month have been addressed and the electricity demand and supply gap will almost be zero in the coming months.
The minister expressed hope that power generation will increase next month and load shedding will be totally overcome.
Giving the reasons of unannounced load shedding, Zafar said there is more demand of electricity whereby supply is less. He said, "We have the capacity but the natural calamities like water scarcity in dams and malfunctioning of Port Qasim and Balloki power plants caused over 5000 MW reduction in power in the national grid."
Due to recent rains, he said, water level in dams has been increased while technical faults in the plants have been removed, and now the situation has considerably been improved.
According to the documents distributed during the conference, during the last five years an amount of Rs 93.474 billion has been spent on completion of 4x500 kV grid stations (5,550 MVA) and 748 km transmission lines, 13x220 kV grid stations (10,219 MVA) and 2,293 km transmission lines.
Current MVA capacity of NTDC system stands at 20,850MW for 500 kV and 28,290MW for 220 kV grids. Similarly, transmission network stands at 5,772 km and 10,523 km for 500 kV and 220 kV respectively.
New projects are in process of completion on war footing in four provinces with a tentative cost of Rs 57.757 billion. First of its kind system capacity ascertainment exercise was under taken in July 2016. As a result of this exercise a total of 45 numbers of projects were identified. Out of this 32 have been completed while remaining 13 are under implementation as detailed in subsequent sections.
The biggest single factor that can be taken as key constraint is the absence of N-1 contingency in the system which effectively means that all the assets are operating at their capacity and there is no excess capacity available in the system.
As a result of on the edge operation, a partial system breakdown on 16th May 2018, was initiated by failure of shunt reactor at Guddu plant yard and system was split in north south. However due to operations of under frequency relays in northern part, system got stabilized but then went into blackout due to early outage of recently commissioned RLNG power plants (Haveli Bahadur Shah & Bhikki power plants) in the central region.
Expressing the caretaker government's commitment for transparent elections, Syed Ali Zafar, who also holds portfolio of Information Ministry, said that they will fully support to the Election Commission to hold free, fair and peaceful elections. He categorically stated that the caretaker government will make no compromise on security of the country and take all necessary decisions in best national interest.
The information minister said the government will perform its responsibilities according to its constitutional mandate without indulging in any blame game. He said the caretaker government will leave guidelines for the upcoming elected government to follow them if it wants.