Budget deficit: Government trying to clean up the mess

Plans to raise funds from 3G auction along with increase in tariff and fuel adjustments.

ISLAMABAD:

The government on Friday dropped a hint to increase both electricity and fuel prices before June to control the swelling budget deficit while admitting for the first time that inflation will touch 12.9 per cent, almost a per cent higher than the target.

While briefing the Economic Advisory Council, Finance Secretary Abdul Wajid Rana said that the government was considering introducing measures to control budget deficit including increase in electricity tariffs and fuel prices.

Headed by Finance Minister Dr Abdul Hafeez Shaikh, the EAC – a consultative forum largely represented by the private sector – reviewed the overall economic situation to get subsequent suggestions for the upcoming budget of 2013, says an official handout of the finance ministry.

The finance ministry said that the secretary briefed the EAC about the expected measures which will reduce the deficit. “Some measures are austerity measures in expenditure, auction of 3G licence, tariff and fuel adjustments and recovery from coalition support fund”, it added.

For the current fiscal year, the government had targeted 4.7 per cent of Gross Domestic Product (GDP) or Rs985 billion budget deficit, however, during the first eight months of the current fiscal year this has already crossed Rs1,153 billion or 5.5 per cent of the GDP.

Similarly, it was expected that the inflation would remain at 12.9% against the target of 12.0%,” said the finance ministry while quoting the secretary. He informed that against real GDP target of 4.3% the GDP would remain at 3.6%.

While the finance ministry itself admitted its three big failures – missing of economic growth, inflation and budget deficit targets – in the official handout, the minister blamed the media for creating negative perception of “good economy” among masses.

According to the handout, the finance minister informed the council about the perceptions and realities regarding economic performance of the government. “He highlighted that the media is continuously creating negative perception among the masses on our economic performance, while realities are different”, it added.

Secretary Planning Division, Asif Bajwa, briefed the council that hurdles like political and bureaucratic pressure, poor project appraisal, over run costs of projects were creating problems in smooth working of the Planning Commission in overall project planning and implementation process.

While concluding the meeting, the finance minister constituted small groups which will work and give suggestion in specific areas for the upcoming budget during the next meeting.

One group headed by Nasim Baig will look into the matters of balance of payment and will give suggestion in next meeting. The second group will provide some concrete suggestions on different concerns raised in the manufacturing and industrial sector. The third group will look into the matters of capital market while the fourth will cover provincial financing and coordination and fifth group will work on social safety nets.

All groups will give suggestions on their allocated areas in the next meeting scheduled to be held on April 7.

Federal Board of Revenue Chairman informed the council in a detailed presentation about the overall performance of FBR in this year. He informed about the ways and means to achieve the targeted tax collection. He also highlighted about the measures taken by FBR to expand the revenue collection.

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