Adviser to Prime Minister on Finance Dr Salman Shah observed that both interest rates and rupee value would remain stable at the current level, while it was imperative for Pakistan to sustain economic growth at seven percent.
He expressed these views while briefing the journalists of Lahore about the economic strategy of Pakistan here on Friday. He pointed out that they were following a well-planned economic strategy that would lead to sustainable growth. He averred that inflation was part of economic growth; however, a balance would be maintained between high growth and inflation.
He admitted that the poor section of society was bearing the brunt of high inflation, but the government would continue with targeted interventions to provide them relief. "The farmers deserve support from the government since for long they were denied fair rates of their produce. Now that they are getting fair price for their produce, hence the prices of many agriculture commodities have gone up. This has benefited over 60 percent of the population that live in the rural areas. Thus, there was a direct link between food inflation and increase in the farmers' income," he added.
He said the core inflation had already been contained through monetary policy, but food inflation could not be controlled through monetary policy. It is either tackled by increasing the supply side to meet the demand or lower the economic growth, which they did not want to do; rather they intended to keep the growth high and counter the food inflation by increasing the supply, he added.
He said that the government was opening utility stores in all poor localities of the country to contain food inflation. It would be opened in both slums and rural areas only, so that maximum benefit goes to the poor. He said that quality products would be offered at controlled rates and the government would also ensure proper monitoring. The government has also allocated Rs 50 billion for community programmes and subsidies on fuel, power and housing sectors to support the lower income groups, he added.
On electricity shortage, he said that the government was making efforts to generate more electricity to meet the demand. He said that they were in the process of ensuring 400-mega watt electricity through captive power and other sources. He said that both the Planning Commission and Wapda failed to anticipate the sudden surge in the demand of electricity. He stated that this year 9.5 percent increase in the electricity demand was expected, but it had jumped to 14.5 percent, this led to energy crisis. However, the country would be able to get 900 Mega Watt additional electricity by the end of June with improvement in water levels in dams and other alternative sources.
On dams, he said that the nation needed to develop a consensus on Kalabagh Dam. "Meanwhile, Bhasha Dam would be completed in the next eight years as infrastructure work on site has already started," he added.
According to him, the government was trying to draft policies to make the production sector more competitive that will enable Pakistan to capture its share in the international market and holding on to the local markets. It is vital to be competitive and it was only possible by increasing our productivity.
He boasted that Pakistan's economy was on the right track and now foreign investment had started pouring into the manufacturing sector. He disclosed that of the total $6 billion foreign investment this year, 33 percent of it has gone to the manufacturing sector. "Pakistan would soon be the manufacturing hub of the region," he claimed.
He told the newsmen that not long ago value of our capital markets only accounted for less than five percent of the GDP and now it has increased to 50 percent. He said that the government was aiming to increase it to 100 percent.
He advised the exporters to improve their management and marketing, if they wanted to capture share in the international markets. He pointed out that two neighbouring countries' economies, namely China and India were growing at a faster pace; hence if Pakistan wants to safeguard its exports and local markets then it has to grow at a faster rate than these countries.
He said that there was no need of making any adjustment in exchange rate; the levy of surcharge on import of raw materials would correct rising trade deficit. Exports of the country would register a growth after passing through the adjustment period, he added.