US likely to release $981m by June-end: Hafeez Shaikh

Financ­e minist­er says IMF help sought to get budget­ary suppor­t fundin­g resume­d.

ISLAMABAD:

United States is expected to release nearly $1 billion to Pakistan before the end of June, a senior official said on Tuesday. Though the money will help bridge the country’s soaring budget deficit, it is still well below Islamabad’s expectations.

On Tuesday, Finance Minister Dr Abdul Hafeez Shaikh said that during his recent talks in Washington, the Obama administration had pledged to release a sum of $981 million by the end of the current fiscal year.

During a press conference after his US visit, Shaikh said the US had assured it would also release an amount of $381 million of the Kerry-Lugar money. This would be the first major chunk the US would give Pakistan through the government channel. Besides, on account of the Coalition Support Fund (CSF) Washington would release another $500-$600 million – an amount that the US would pay in return for Pakistan’s services in the war on terrorism. Under a five-year Kerry-Lugar aid package, the US had assured that it would give $1.5 billion per annum to Pakistan. However, since 2009, the US has disbursed only $359 million through government channels – putting a big question mark over US intentions of delivering on the $1.5 billion-per-annum promise.

On November 15, former US special envoy to Pakistan and Afghanistan Richard Holbrooke had pledged to fast-track the release of $500 million from the Kerry-Lugar funds to help the flood affected population.

But the US only released $190 million, remaining unfaithful to Holbrooke’s promise. Pakistan had hoped to get $1.5 billion by June 30 under the CSF but so far the US has disbursed $744 million and Islamabad’s expectations to get additional $600 million still fall short of government projections.

For the current fiscal year the government is expecting a budget deficit of 5.3 per cent of the national income which is estimated to be Rs907 billion, the finance minister said.

Shaikh said the IMF has also agreed to send a mission in the first week of May for the fifth review of Pakistan’s economy. The review is a prerequisite for the release of the withheld tranche of $1.7 billion under the suspended bailout programme. The minister said Pakistan is satisfied with the outcomes of the recent talks held with the IMF at the side line of the Spring Meetings.

Shaikh said Pakistan has sought the IMF’s assistance to get the suspended budgetary support funding amounting to $1 billion resumed from the World Bank and the Asian Development Bank.

Answering a question he said economic reforms are in Pakistan’s interest, adding that the cut in government size and an increase in revenues would help the government sustain the progress made so far and would put the country on the  growth trajectory.

“I acknowledge that a lot of work has to be done but at the same time there is a need to build up on the progress made so far,” Shaikh said. Pakistan, according to him, is well positioned to restrict the budget deficit to 5.3 per cent of the total national income by the end of June.

Speaking on the challenges resulting from next year’s budget, the finance minister said the foremost challenge would be to maintain economic stability. After that, he said, the next challenge is to ensure benefits of growth to the masses and tackling the energy crisis. In the next budget, he said, the government would ensure targeted subsidies, while electricity subsidies would be given to lifeline consumers.

Speaking on the occasion, Federal Board of Revenue chairman Salman Siddique said that the IMF appreciated Pakistan’s arrangement with the industry regarding two sales tax rates.





Published in The Express Tribune, April 27^th, 2011.