The candidate has been chosen by the top management of the Planning Commission (PC) without following the formal procedure of placing an advertisement for the post, an obligation for hiring top executives from the private sector.

Planning Commission is known to bypass rules when it comes to appointment of top executives. Current Member Infrastructure Ghulam Mohayuddin Marri, Member Science & Technology Dr Samar Mubarakmand, Member Implementation and Monitoring General (Retd) Shahid Niaz and Member Social Sector Saba Gul Khattak were all appointed after some guards were let down.

The Chief Economist of Pakistan seat has been lying empty for almost a year after Dr Jafer Qamar resigned as he remained alienated from domestic economic issues. Planning Commission Deputy Chairman Dr Nadeemul Haque was allegedly behind Qamar’s appointment who was brought from the US in August 2010. Qamar’s appointment was also made after some rules were removed from the hiring procedure. The move proved to be a mistake as he did not have economic policy making experience in Pakistan.

Historically, the chief economist position is a grade 22 post for the economist group of civil servants, however, the authorities are not interested to appoint any of the currently senior officials serving. One of the senior officials of the economist group is serving as cconomic adviser Finance Ministry, anotherhas been placed in the National Tariff Commission by former finance minister Shaukat Tarin to create space for his friend Sakib Sherani while another senior officer is serving in the Planning Commission as joint economic adviser.

“Riaz Khalid’s name is still at the proposal stage. A summary is pending with Finance Minister Dr Abdul Hafeez Shaikh for a decision,” said Ishfaqullah Khan, spokesperson for the Commission in a terse response. He said that since Pervez Tahir left the post of chief economist about six years ago, the economic section of the Commission has been directionless.

The Planning Commission has not advertised the post, said Asif Bajwa Secretary planning Commission while talking to The Express Tribune. No search committee was formed to find at least three suitable candidates for recommendation to Prime Minister Yousaf Raza Gilani, a followed practice.

Sources said the the Planning Commission has requested the Finance Minister to advise Prime Minister Yousaf Raza Gilani to exempt a few rules and make way for appointment of Riaz Khalid as chief economist.

The office of the Auditor General of Pakistan has framed numerous audit objections in familiar cases where appointments were made by bypassing rules. In cases where exemption was not granted by the premier, the audit recommended recovering the amount spent on pays and perks of irregular appointees.

The chief economist post requires diversified experience in the areas of economics, trade, poverty, inflation, fiscal and monetary policy making. The job becomes more challenging when the country is passing through critical times. Any mistake in choosing an inappropriate person could hurt the policy making, said a senior official of the Commission.

In a testimony to a parliamentary committee, Finance Minister Dr Abdul Hafeez Shaikh in a cautious policy statement said that the country was passing through difficult times, requiring careful management.

Since 2010 – when the incumbent deputy chairman decided to abandon five-year economic plan document – there is no economic policy paper suggesting broader economic policy guidelines. Last May, the National Economic Council approved New Growth Strategy but despite lapse of one year, the Planning Commission has failed to present a workable implementation strategy.

The involvement of the earlier hand-picked chief economist Dr Jafer Qamar can be gauged from the fact that his name is nowhere in the list of core members involved in preparing the New Growth Strategy document despite the fact that in May 2011 Qamar was serving as Chief Economist of Pakistan.

Published in The Express Tribune, May 19^th, 2012.

BISP Chairperson Farzana Raja told the National Assembly Standing Committee on Finance that 80 million people live below the poverty line. The survey did not include Federally Administrated Tribal Areas where it was delayed because of the security situation.

The door-to-door poverty survey was launched for identifying the lowest income segment in order to provide Rs1,000 monthly grant to needy people. The country’s total population is 175.3 million, according to the National Accounts Committee.

The survey results were based on a comprehensive questionnaire and the answers have been securitised in a computer to avoid human errors, said Farzana Raja.

The results of the BISP survey negate the outcome of Pakistan Social and Living Standards Measurement (PSLM) Survey 2010-11. According to the results of the basis of PSLM survey which was a committee constituted by Planning Commission Deputy Chairman Dr Nadeemul Haque, the incidence of poverty has declined from 17.2% in 2008 to slightly over 12% in 2011. In 2010-11, the estimated population was 175.3 million and around 21.5 million people were living in abject poverty.

The government is reluctant to officially announce the PSLM survey based results. Experts argue that a drop in poverty is impossible when there is an average job growth of 2.6% in the last four years against the requirement of 8% and inflation has stayed in double-digits for the fifth consecutive year.

The government’s expenditures exceeding its incomes became the biggest reason for double-digit inflation in the country,” conceded Finance Minister Dr Abdul Hafeez Shaikh in the committee meeting. He said the government’s other big failure was decreasing investment. Out of every Rs100 income, the country invests only Rs12.5 – the lowest ratio in history, according to the Annual Plan Coordination Committee report.

Farzana Raja said that BISP data almost matched the PSLM data.

BISP is currently providing Rs1,000 monthly cash grant to 40 million people or 23% of the total population. IF the grant was being provided using the Planning Commission’s methodology 18.5 million people would have been deprived of the BISP.

He added that out of 80 million total poor in the country, 64 million or 36.5% of the population lives in chronic poverty.

She proposed the BISP can sit with Planning Commission and Pakistan Bureau of Statistics to share its findings.

She said the BISP needs Rs106 billion next year just to feed 40 million people, currently covered in the programme. However, the finance ministry has budgeted Rs60 billion, which is only 56.6% of the demand. Farzana Raja said that the US would soon provide $75 million under Kerry Lugar Act for the BISP.

The federal government has provided Rs126 billion to the BISP in the past four years while an amount of Rs26 billion was given by the foreign lenders, said Finance Secretary Wajid Rana.

Published in The Express Tribune, May 18^th, 2012.

The PAC, parliament’s top accountability body, took the decision after the Federal Audit’s director general (DG) revealed that the former top officials of the information ministry had bought the imported luxury vehicle while the premier had only allowed the purchase of a Hyundai van for staff use.

PAC Chairman Nadeem Afzal Chan ordered Information Secretary Taimur Azmat to complete the inquiry within 15 days and fix responsibility. The secretary’s efforts to convince the accountability body that the purchases were legal went unheard.

The Mercedes vehicle in question was bought for Rs2.2 million.

“Who pocketed the additional Rs1 million?” asked Noor Alam, a Pakistan Peoples Party MNA.

The audit official said that in December 2004, then prime minister Shaukat Aziz relaxed a ban and allowed the purchase of the Hyundai Grace Van. However, the ministry illegally purchased an imported vehicle, Mercedes Benz Sprinter 311 CDI coach from Messers Shah Nawaz. The payment for which was made in July 2005.

“The purchase of the foreign-assembled vehicle was unauthorised”, said Federal Audit’s DG. He said despite having the premier’s approval to purchase a van, the ministry advertised the approved vehicle but gave specifications of a Mercedez Benz.

In another case, the PAC ordered an inquiry into irregular expenditures of $15,647 (Rs1.44 million) on dental treatment by a former bureaucrat. Azmat contended that recently-retired information secretary Sohail Mansoor got dental treatment when he was posted as the press minister in New York.

ATV Default Case

The PAC also decided to request the Supreme Court to settle the issue of the Rs260 million default by the contractors of a private television channel.

The issue is pending with the apex court and despite repeated attempts the court is not fixing a hearing date, said an official of the ministry. He requested the PAC that his name should not appear in media reports since the case was still pending in the court.

He alleged that the ATV contractor has defaulted and when the government tried to recover the amount he went to court, seeking appointment of an arbitrator.

He said the contractor has hired the services of Athar Minalla. “As long as Minalla is the lawyer the ministry cannot get an early hearing date”, remarked PAC Chairman Chan.

In the 2007 judiciary restoration movement, Minalla was the spokesperson for Chief Justice Iftikhar Mohammad Chaudhry.

The official said that the ministry has requested the Supreme Court to allow a re-auction of ATV.

Published in The Express Tribune, May 17^th, 2012.

The government will use these funds to pay interest against debt instruments – a move taken to reduce the circular debt – and compensate independent power producers.

The decision was taken by the federal cabinet, headed by Prime Minister Yousaf Raza Gilani, on Wednesday. The cabinet allowed issuance of five-year Terms Finance Certificates – an instrument used to raise money – to raise Rs82 billion for easing the circular debt.  The government will pay Karachi Interbank Offered Rate (Kibor 12.5% plus 0.5%) that bring the interest rate payment to Rs10.7 billion per annum and Rs53.3 billion for five years. This amount will be recovered from electricity consumers.

As elections approach, experts argue that the government is desperate to resolve the energy crisis without addressing core issue.

The government has resorted to ad-hoc measures instead of taking on the root cause of circular debt, which is difference between cost of electricity generation and end consumer, currently Rs4.05 per unit, according to Finance Secretary Abdul Wajid Rana’s latest statement in a parliamentary committee.

The Finance Secretary had told the committee that the government will not bear the cost of TFCs. Rana said TFCs will be issued by Central Power Purchasing Agency and help release Rs300 billion in the system, largely to address the circular debt.

The PPP-led government has given Rs1.3 trillion in power subsidies in four years of its rule, a figure that is expected to reach Rs1.6 trillion by the end of this fiscal year, according to finance ministry estimates.

In another decision, the federal cabinet endorsed a decision of Economic Coordination Committee of the Cabinet in which it decided to recover Rs8.3 billion annually from electricity consumers through monthly utility bills for payments to independent power producers (IPPs) against their idle generation capacity because of non-availability of fuel.

The decision has been taken despite serious reservations shown by Secretary Finance Abdul Wajid Rana. Secretary Finance recorded his dissenting note in the decision, saying the financial impact of the decision was enormous and also feared that it could increase government’s subsidies if National Electric Power Regulatory Authority refuses to pass on this burden onto consumers.

The move was strongly backed by oil lobby representatives who have strong influence as many aides occupy top slots in Planning Commission, according to a source.

Experts fear that idle capacity payments to IPPs may end up like the Rental Power Plants scandal in which they made billions of rupees on account of idle capacity payments without producing a single unit in many cases.  According to the decision, Rs674 million will be paid monthly to IPPs against their idle capacity for 15 months. The idle capacity remains out of reach due to non-availability of fuel because of non-resolution of circular debt. The decision will take effect from September 2011.

According to the summary, in return of idle capacity payments the IPPs will not call sovereign guarantees. The government defaulted on Rs18.5 billon sovereign guarantees on May 9, for the first time in the country’s history, and the IPPs delayed legal proceedings after the government promised to get a favourable decision from the ECC.

Published in The Express Tribune, May 17^th, 2012.

Headed by Nadeem Afzal Chan, the Public Accounts Committee (PAC) on Tuesday criticised the misuse of 22 luxury and bullet-proof vehicles as rules did not allow anyone to use vehicles above engine capacity of 1,800cc.

It’s the first time the PAC has issued directives against politicians and military brass as the body has so far taken only bureaucrats to task.

“The PAC unanimously decides that by June 15 either all vehicles should be withdrawn or rules be amended supporting the use of luxury vehicles,” Chan said.

The matter came to the notice of the PAC after seven years and if it did not take any decision on merit, the members would be remembered in history as ‘dishonest’, he said.

The PAC cautioned that if by June 15 the vehicles were not taken back, the auditor general of Pakistan (AGP) would frame charges to recover the cost of vehicles and expenses incurred on maintenance from the users.

Cabinet Secretary Nargis Sethi told the committee that the vehicles were bought from a grant issued to the Intelligence Bureau in 2005. The total cost of the vehicles was Rs600 million, Sethi said, adding that then prime minister Shaukat Aziz had ordered the purchase of these vehicles.

Total grant issued to the Intelligence Bureau was Rs2.4 billion. But according to audit documents, from Sept 2004 to Feb 2005 three supplementary grants amounting to Rs1.2 billion were sanctioned for the purchase of vehicles.

Responding to a question, Sethi said that under the rules a secretary could use up to 1,300cc car, and a minister was allowed up to 1,800cc cars, admitting that rules did not permit bullet-proof and luxury cars.

Who is using bullet-proof cars

Currently, Sethi said, the vehicles were being used by Chief of Army Staff Gen Ashfaq Parvez Kayani, Joint Chiefs of Staff Committee Chairman Genl Khalid Shameem Wynne, Senate Chairman Nayyar Hussain Bukhari, National Assembly Speaker Dr Fehmida Mirza, Foreign Minister Hina Rabbani Khar, Information Minister Qamar Zaman Kaira, Industries Minister Chaudhry Pervaiz Elahi, Khyber-Pakhtunkhwa Assembly speaker and Balochistan and KP chief ministers.

Among politicians, Asfandyar Wali of the Awami National Party, PML-Q President Chaudhry Shujaat Hussain and PML-N President Nawaz Sharif were using the vehicles. “These vehicles were permitted by my predecessors and I cannot dare to call back those,” Sethi stressed.

At the same time, she pointed out that the government was incurring heavy expenses on the maintenance of bullet-proof vehicles and the amount spent on the maintenance of one vehicle could buy a new corolla.

“The use of these cars must not be continued indefinitely and these must be taken back,” said AGP Akhtar Buland Rana.

Sethi said that the premier was using 2005 model cars which were quite old, prompting Noor Alam, a PPP MNA, to remind the secretary that Pakistan was a poor nation and could not afford such luxuries.

‘Misuse’ of authority

In a case of misuse of authority, Pakistan Telecommunication Authority (PTA) Chairman Muhammad Yaseen sanctioned an Eid allowance of Rs350,000 for himself, inviting the wrath of PAC.

The matter came to light when the PAC chairman asked the PTA chief whether he had taken an Eid allowance. “I took Eidi as PTA chairman to which I am entitled,” said Yaseen.

Trying to justify his action, Yaseen said that since 2008 the government had not increased packages for professional management posts. To this, the PAC chairman said that if he was dissatisfied with his package he should have resigned.

“The gross package of PTA chairman is Rs1 million per month while I serve on a constitutional post and my total salary is Rs150,000,” countered AGP Rana.

Published in The Express Tribune, May 16^th, 2012.

The National Finance Commission, a body that decides revenue sharing arrangements between the federal and provincial governments, devised an interim formula to distribute 80% of sales taxes on services to the provinces. The decision was made despite the fact that the Punjab and Balochistan finance ministers were not present at the meeting.

Punjab Chief Minister Shahbaz Sharif, who also serves as his province’s finance minister, boycotted the meeting because of his party’s stance that Prime Minister Yousaf Raza Gilani’s administration is illegal after the premier’s conviction for contempt of court. Balochistan Finance Minister Asim Kurd Gillo’s is explained by a more mundane reason: his flight from Quetta to Islamabad did not take off on time, according to finance ministry spokesperson Rana Assad Amin.

Federal Finance Minister Abdul Hafeez Shaikh, who presided over the meeting, had called it to discuss the biannual progress report on the implementation of the 7th NFC award, from July to December 2011. But the meeting ended up taking on other subjects as well.

It is not as though Punjab and Balochistan had no representatives at all. The two provinces joined Khyber-Pakhtunkhwa in challenging the authenticity of Sindh’s gas production numbers, claiming these figures have been inflated by Karachi to get a greater share of royalty for natural gas. The participants of the meeting, however, could not agree on a finalised formula for distributing services’ sales tax revenues and decided to go with an old arrangement for an interim period until a final decision can be reached.

The constitution is ambiguous on whether or not all provincial finance ministers need to be present while an NFC meeting takes place. Senator Farogh Naseem of the Muttahida Qaumi Movement, a constitutional lawyer, said that NFC meetings notified far enough in advance can be held without all members being present.

Yet convention has dictated that if all members are not available, the meetings get rescheduled. Two months ago, the federal finance ministry postponed an NFC meeting after the Balochistan finance minister said he could not make it.

Decisions

The government collected Rs64 billion in sales tax on services in the first six months of the fiscal year ending June 30, 2012. About Rs51 billion of that – 80% – will be distributed among the provinces immediately, with the fate of the remainder to be decided once a finalised formula has been worked out, said the federal finance ministry spokesperson.

Under an agreement drawn up in 2010, the federal government was meant to supplement every Rs100 collected by the provinces in sales taxes on services with Rs36 from its own revenues, a measure that was meant to be a stopgap to give the provinces time to build up their own revenue generating capacity. Services such as banking, insurance, stock market, advertising, and construction are subject to a sales tax. Punjab gets 60.4% of the total collection, Sindh 50%, Khyber-Pakhtunkhwa 15.6% and Balochistan 10%, bringing the total to 136%.

Sindh gets no love

The other three provinces, it seems, had many disagreements with Sindh. The province was accused of collecting sales taxes even on services that clearly fall into the jurisdiction of other provinces. In addition, it was accused of exaggerating its gas production figures to get more royalties.

“Sindh will give a presentation to the other provinces to allay concerns about collecting sales taxes on services,” said Amin. He also added that the petroleum secretary was asked by the NFC to verify Sindh’s claims of its production and wellhead prices.

The government distributed Rs15.7 billion in gas royalties from July to December, of which 60% went to Sindh, with Balochistan getting the next highest share of 23.6%.

The NFC also approved the report it had been called to review. In the first six months of fiscal 2012, the federal government transferred Rs458.5billion, or 57.5% of its revenues to the provinces. Punjab got Rs237.2 billion, Sindh Rs112.6 billion, KP Rs75 billion and Baluchistan Rs46.5 billion. The federal government gave 1%, or Rs8 billion, of the divisible pool to KP to compensate losses incurred while fighting war on terrorism.

Published in The Express Tribune, May 15^th, 2012.

In the latest blow, dashing Pakistani exporters’ hopes of making significant gains from the proposed trade concessions, the EU has decided to cut the waiver period from 36 months to just 18 months. It has also decided to place ceilings on the quantity of duty-free goods being imported from Pakistan.

Earlier, in February this year, the World Trade Organization approved the compromised concessions package by making 20 products subject to quotas and reducing the effective period to two years with an option to extend it to the third year. In September 2010, the EU had announced that it would waive duties on import of 75 items from Pakistan for a period of three years. These 75 products’ imports are worth almost $1.2 billion, or about 5% of Pakistan’s overall exports.

The decision has been taken by the Permanent Representatives Committee, known as Coreper. The committee is responsible for preparing the work of the Council of the EU and occupies a pivotal position in the decision-making system. The forum keeps political control over the work of the expert groups.

“It is not just trade measures but an issue of political credibility for the union, therefore we will not go back on our commitments,” said EU Ambassador to Pakistan Lars-Gunnar Wigemark while talking to The Express Tribune.

Wigemark rejected that the trade concessions proposal has been shelved. “It is alive, kicking and going into the final phase,” he declared.

Without disclosing details since the deal is not formally approved, Wigemark said that some conditions of the package have been changed, which should not surprise people due to economic situations in some of the member countries. “It is not uncommon having concessions with limitations,” he added.

A Pakistani diplomat working in Brussels said the “economic benefits of the package have almost eroded and the only importance of the concessions, for both Pakistan and EU, is claiming political victory. According to initial estimates, the waiver could increase exports to $300 million and with the latest proposed changes the benefit would be less than $100 million, or just 0.3% of last year’s total exports.

The EU reduced the time period and made five more products subject to tariff rates quotas after some member states refused to sanction the concession package following deepening economic crisis in their states. They also questioned whether Pakistan’s industry will be able to deliver amid the prolonged power outages.

During discussions the members states were largely divided into two groups, one advocating shelving the deal due to economic difficulties while the others arguing to honour the political commitment.

With EU stepping back from its promises, the chances of getting Generalized System of Preferences (GSP) plus status by 2014 have also diminished. The GSP plus promises general duty waiver on all products imported from selected developing countries.

Published in The Express Tribune, May 13^th, 2012.

The government will not bear the cost of Term Finance Certificates (TFCs) – the debt instrument – to be issued to raise funds, as the interest cost will be charged from the system, said Finance Secretary Abdul Wajid Rana on Friday.

He was speaking in a meeting of the National Assembly Standing Committee on Finance. The meeting had been called to discuss budget proposals but most of the time was consumed in discussing the power crisis. The government has decided to float Rs80 billion worth of TFCs for partially eliminating the circular debt, estimated in the range of Rs350 to Rs400 billion.

Rana said the TFCs will be issued by the Central Power Purchasing Agency that will recover the cost “through the system”. He said the TFCs, backed by the Oil and Gas Development Company (OGDC), will release Rs300 billion in the system, largely addressing the circular debt issue.

The secretary said the mark-up on the TFCs has not yet been finalised. A finance ministry official working on the transaction said the cost will be Karachi Interbank Offered Rate (12.5%) plus 0.5 to 1%. This translates into Rs10.6 billion per annum.

The official, however, said the transaction will transfer CPPA liabilities to OGDC having no implications for the consumers and claimed that the mark-up will be paid out of recoveries made by power distribution companies.

In the last four years, the government has tried several times to resolve the circular debt issue through temporary measures like providing subsidies and creating more debt to retire previous debts.

“A permanent solution demands something bigger than such steps,” said Arif Aziz Shaikh, a member of the National Assembly.

These days, the unannounced load-shedding of 18-20 hours has crippled life in both rural and urban areas, prompting mass protests in Punjab.

The government has utterly failed in addressing the root causes of the circular debt, which are gap between determined and notified tariffs, collection falling far behind billing and failure to control line losses.

The difference between determined and end-consumer tariff has again peaked to Rs4.05 per unit, said Wajid Rana. Owing to stay orders given by courts, around Rs90 billion on account of fuel price adjustment surcharges is stuck in the system, he said.

Rana said the Economic Coordination Committee (ECC) of the cabinet will approve a summary for issuance of the TFCs and the instrument will be issued outside the budget having no implications. It seems these will have to be taken on the budget if not this year may be next year, as is the practice by the government to show deficit at a lower side in a particular year.

Earlier, the government had issued roughly Rs160 billion TFCs but that could not resolve the chronic debt problem as it left the major causes unaddressed. It has so far taken Rs550 billion on its books in the last two years. In addition to that, it swapped Rs160 billion debt with banks, but to no avail.

Rana said the government has so far released Rs119 billion in subsidies on account of price differential during the current fiscal year. The amount does not include subsidies of Rs325 billion given in the previous year.

Separately, the unabated load-shedding also took over normal agenda of the Public Accounts Committee (PAC) that was scheduled to take up audit objections of the Ministry of Water and Power.

PAC Chairman Nadeem Afzal Chan made bureaucrats responsible for the crisis, saying they did not perform their jobs and failed to reduce line losses and theft. “Instead of burning effigies of politicians, people must burn effigies of bureaucrats,” said Chan.

Published in The Express Tribune, May 12^th, 2012.

Sources say it may be indicative of a thaw in frozen ties between the war-on-terror allies.

“An amount of Rs99.5 billion, or $1.1 billion, has been added into non-tax receipts for the next financial year,” said sources in the finance ministry involved in the budget-making exercise.

For the current fiscal, authorities had budgeted $1.34 billion, or Rs118.7 billion, on account of CSF reimbursement but the US has not released the amount yet, linking it with reopening of the Nato supply lines. Outstanding CSF dues at present amount to $2.5 billion.

Some sources, however, say that the finance ministry’s budgeting of the CSF indicates that both the sides have arrived at an agreement.

The inclusion of the amount in next year’s budgetary projections without any solid assurance, however, will lead to higher budget deficit in the next fiscal. There are unconfirmed reports that an understanding on tax on Nato containers has also been arrived at.

“The [US and Pakistan] have resolved the outstanding issues,” said a western diplomat on condition of anonymity. The US could offer compensations to the families of deceased soldiers, he said.

The US was ready to apologise till April 15, but the attacks in Kabul inside the heavily-fortified red zone changed that, he added. No direct link has been established between the attack and elements from within Pakistan.

“Both Pakistan and the US officials have been negotiating for the last ten days,” said Secretary Finance Abdul Wajid Rana in a parliamentary committee meeting.

He said negotiations were going on for release of $400 million, “but still there are risks”. He did not explain the nature of risks.

Rana said there were indications that $400 million could be released before June, provided some of the issues are resolved.

Since June 2010, the US has not disbursed any amount and after May 2011 attacks Pakistan has not billed CSF claims, the secretary said.

“So far, we are calculating $400 million in our non-tax revenues for this fiscal,” said Rana Assad Amin, spokesperson for the finance ministry. The amount is only 30% of the original budget estimates.

The ministry has finally excluded Rs75 billion, estimated to be received through auction of 3G licenses, from its non-tax revenue receipts, he said.

This will widen the deficit to 5% of GDP, Rana added. Independent experts, however, have projected over 6% budget deficit excluding an additional 1.9% on account of debt payments.

(Read: Pak/US ties – Challenges ahead)

Published in The Express Tribune, May 12^th, 2012.

The country’s forex reserves are expected to almost halve by July 2013 – from the much-touted high of $16 billion during the current government’s tenure – and import bill to surge with the country’s imports growing twice as fast as exports.

The forecasts were highlighted at the Annual Plan Coordination Committee (APCC) meeting on Thursday which approved next financial year’s development budget and annual plan for fiscal 2012-13.

According to the approved plan, the country’s gross official reserves may deplete to $8.24 billion by June 2013, which is 28%, or $3.2 billion, lower than what has been projected for close of this fiscal ending June 30. By this June, the plan states, gross official reserves will stand at $11.4 billion, which is $3.8 billion, or 25% lower than last June’s reserves level of $15.2 billion.

This drastic depletion, primarily because the country will have to repay a significant portion of the foreign debt, will have adverse implications for exchange rate that in return will fuel inflation due to increasing cost of imported goods.

Surging oil bill

Next year’s oil import bill has been estimated at $16.9 billion, against this year’s $15.9 billion.

The government has worked out the next year’s average crude oil rate at $114.9 per barrel, against this year’s average of $115.3 per barrel, despite expectations of increase in oil prices in the international market.

The current account deficit – gap between total foreign receipts and payments – is expected to widen to $5.3 billion, or 2.1% of total size of economy, in next fiscal. For the current fiscal, the current account deficit has been revised to $4.2 billion, or 1.8% of the GDP – $2.8 billion higher than original projections approved last year.

Dwindling exports, surging imports

Against a target of $25.8 billion, exports will contract by 2% and remain at $24.8 billion for this year, the APCC said. The exports target for the next fiscal has been approved at $25.9 billion, an increase of 4.7% over the current year’s revised target.

Imports, however, are projected to grow to $42.8 billion next year, 7.3% higher than this year’s revised imports of $40.2 billion. Next year, remittances are estimated to stand at $14.1 billion, against current year’s $13.2 billion.

The government is hoping it will receive $5.3 billion in fresh external loans next year. The International Monetary Fund has assessed Pakistan’s gross external financing requirements for fiscal 2012-13 at $10.2 billion – the gap will be filled from reserves. Total external debt is expected to stand at almost $69 billion – an increase of $2.3 billion within a year.

Growth figures

For the next financial year, the government has set 4.3% economic growth target while inflation has been projected at 10.5% – the sixth consecutive year of double-digit inflation. The agriculture sector is expected to grow by 4.1%, industrial 3.9% and services 4.6%.

Low savings, investment

Savings and investments in the current fiscal slipped to the lowest level in the country’s history.

Investment as a proportion of GDP stands at 12.5% while it was expected to grow to 13.8% in the current fiscal. Next fiscal’s projected investment ratio is 13.2%.

Similarly, savings have slipped to their lowest level. Against every Rs100, the nation saved only Rs10.7 while the target was Rs13.2. The APCC has set 11.1% as savings target for next fiscal.

Development budget

The APCC also recommended Rs350.2 billion for federal development programme and Rs475 billion for provinces’ annual development plans, bringing the total overall development budget to Rs825.2 billion, which is Rs95.2 billion, or 13%, higher than the current fiscal year’s budget of Rs730 billion.

The National Economic Council, headed by the prime minister, will consider the APCC recommendations for approval.

Published in The Express Tribune, May 11^th, 2012.