Advisor to Prime Minister on Finance Dr Abdul Hafeez Sheikh has accepted that Pakistan Tehreek-e-Insaf (PTI)-led government has missed almost all the major economic targets for the current fiscal year, saying, "This is correct that most of the targets were not met." Twin deficit is a major challenge for the country and if it is not dealt with, it will propel the country to default said Sheikh while launching the Economic Survey 2018-19, which noted dismal performance of the present government on all economic fronts from fiscal side to GDP growth and inflation during the last nine months.
Sheikh laid blame on previous governments for the current economic problems. "We must be aware of who had set these economic targets," the advisor quickly added. Flanked by Chairman Federal Board of Revenue (FBR) Shabbar Zaidi, Minister of State for Revenue Hammad Azhar and Minister for Power Umer Ayub as well as Advisor on Commerce Abdul Razak Dawood, he wanted every one to analyse why country is compelled after every few years to go the IMF and is unable to meet the needs of the people. The advisor said that the country's debt of Rs 31 trillion has been consuming half of its revenue on account of debt servicing and government has to allocate Rs 3 trillion for next fiscal year for debt servicing.
He said that borrowing from other countries has increased to $100 billion with any increase in capacity of dollar earning (exports growth) which remained zero percent during the last few years. "This situation poses a threat," he said and added that during the last two years of previous administration of State Bank of Pakistan, foreign exchange reserves have contracted from $18 billion to $9 billion, trade deficit increased to $32 billion while current account deficit widened to $18 billion.
The advisor said that for a long period basic issue of the country - reforms - has been ignored. On the expenditure side, Sheikh said that spending was more than income by Rs 2.3 trillion and consequently the government had to print currency notes to bridge the deficit which was highly inflationary.
The advisor on finance said that broad outlines of the government are stabilisation of the economy, management of external account and public financing, while the International Monetary Fund (IMF) programme is itself a process of continuing efforts for a period of three years to achieve these outlines.
Sheikh said, "We need to mobilise revenue and undertake very aggressive campaign on austerity for public finance management." He did not respond to the questions with regard to rollover of loans - a prior action by the IMF - and about the fate of concessions to zero-rated sectors. However, Sheikh said the government would protect the vulnerable and will allocate Rs 216 billion in the budget to protect low-users of electricity.
He said that the Prime Minister is committed to taking difficult decisions and the government will try to fix the problems on a permanent basis. The advisor also recounted the measures taken by the current administration to deal with current account deficit- slapping duty on imports and providing incentives to exporters. Additionally, he said $9.2 billion has been mobilised from friendly countries, while the country got oil facility on deferred payment from Saudi Arabia and Islamic Development Bank. Now the decision has been taken to have partnership with the IMF to give a message that Pakistani is committed to fiscal discipline.
Hafeez Sheikh said that decision will be taken in the budget for austerity and expressed the resolve to tackle the accumulated debt of Rs 1.3 trillion of State Owned Enterprises (SOEs). The GDP growth has been projected at 3.3 percent for the current fiscal year against the target of 6.2 percent following poor performance by agriculture, industrial and services sectors.
The government's performance on fiscal side was even worse as fiscal deficit was recorded at 6 percent during the first nine months of the current fiscal year against 4.3 percent for comparable period of the last fiscal year and 4.9 percent for the entire fiscal year. The fiscal year may close with well over 7.5 percent budget deficit for the entire fiscal year due to impact of exchange rate depreciation and discount rate increase.
Inflation has almost been doubled to 7 percent during the July-March 2019 against 3.8 percent for the comparable period of last fiscal year and 6 percent of entire fiscal year.
Exports during July-April 3019 stood at $19.7 billion as compared to $19.19 billion for the same period of the last fiscal year, reflecting a decline of 0.1 percent while total public debt was recorded at Rs 28,607 billion at the end of March 2019 after an increase of Rs 3,655 billion during the first nine months of the current fiscal year. External debt contributed to Rs 1900 billion to the public debt during the first nine months of the current fiscal year.
Minister for Power Omar Ayub said that an amount of Rs 81 billion has been saved due to recovery drive and action against electricity thieves during the last eight months. He said there was zero load-shedding during Ramazan on most of the feeders.
Chairman Federal Board of Revenue (FBR) Shabbar Zaidi said that all chief executive officers (CEOs) of banks have agreed to provide details of Benami accounts of over Rs 0.5 million, as well as CNICs with wealth statement.
Zaidi said that the State Bank of Pakistan (SBP) and banks are fully cooperating with the FBR in provision of information about banking data of withholding taxes. Banks will provide the data of withholding taxes with effect from January 1, 2018 onwards with CNICs of the withholdees to FBR.
In this regard, data of all the withholding sections will be provided by the banks. The FBR has also seeking information of Rs 500,000 and above Benami accounts from the banks and banks are cooperating with the FBR, he added.
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