Finance Minister Ishaq Dar unveils the Economic Survey for 2012-2013. PHOTO: MOHAMMAD JAVAID/EXPRESS
"We have set the target for GDP growth rate at 4.4%percent," Dar told a press conference on the eve of a federal budget presentation in the new parliament.
The new government of Prime Minister Nawaz Sharif's Pakistan Muslim League-N faces a daunting array of problems ranging from an energy sector crippled by $5 billion of debt to dwindling foreign exchange reserves, all the while facing down a Taliban insurgency.
Dar said that the GDP growth rate in the current fiscal year ending on June 30 remained at 3.6% against a target of 4%.
He said that the fiscal deficit which had run to 4.7% would be curtailed by his government through "strict financial discipline".
Power crisis
The finance minister revealed that the government had bloated borrowing to Rs14 trillion by giving subsidy, bridging the budget gap and in trying to service the increasing circular debt.
“The rate at which the ministry of finance has taken on circular debt, it is not sustainable.”
For their plan to address the power crisis, Dar said that the new government will start by addressing the circular debt that stands at over Rs500 billion. They will also reduce line losses to reduce the cost of providing electricity.
"We want to do it in minimum possible period and just finishing off this debt will not solve the problem unless we reduce our line losses or thefts which were more than 30%."
The finance minister noted that non-payment of bills was also a major issue. “We will not only reduce it, but minimise it. We will try to resolve this problem of non-payments.”
He said an aggressive plan has been prepared to take the issue of circular debt head on and it would be eliminated within 60 days.
“We will need to address all the causes of loadshedding.”
Investment to GDP ratio
The Finance minister lamented that previous government had a very poor investment to GDP ratio and they aim to address this.
"We will bring the GDP back to 7%," Dar said. "We believe if the economy is revived, terrorism can easily be dealt with."
He said the outgoing government had borrowed extensively, even in violation of set rules.
"This is not sustainable," Dar continued. "You're not investing in dams, hydraulic projects or expressways and the rise in debt is self-servicing. This is also in direct violation of the public sector act."
The rise in borrowings will only end up being a burden for the future generations, he said.
Dilating about the overall debt, he said it is set to cross Rs14 trillion by the end of June, 2013. Giving a break up, he said that the debt had risen by as much as Rs7.5 trillion only in the past five years.
"We will tackle the debt situation head-on, so that the power crisis can be resolved," said Dar, though it was not going to improve in the short term. "Budgetary deficit was targeted at 4.7% but it would be around 8.5%."
Currently, the country is facing a shortfall of Rs350 million in tax recoveries. He said, the government will empower the tax recovery system with technology so that no one is able to evade tax illegally.
"We will devise a progressive budget," Dar said "and do away with the fiscal debt in two months."
"Our stance on inflation is that it should remain around 8%. We will try not to add to that."
Efforts will also be made to mitigate misuse of authority, to restore the confidence of investors, to hire new people on merit particularly in loss-making organisations such as PIA, Steel Mills etc. and to stay true to the plan chalked out by the Prime Minister Nawaz Sharif, Dar concluded.
Balance of Payments
The Finance minister, stressing on transparency, said that the country has a current account deficit of $2.9b while the State Bank has foreign reserves of just $6.2b.
The fiscal deficit, he said, stands at 4.7% of the GDP.
“It will be our endeavour to reduce this to 4% in the next three years.”
Public sector spending
Dar suggested that one of the major reasons for the structural collapse of the government is the lack of public sector spending and capital flight.
“We plan to increase public sector spending to Rs540 billion, and this will be by the federal government.”
He also promised that they will try to restore the confidence of investors. “People do not have confidence in us to do what we promise to do. We will try to address it and restore confidence of investors.”
3G licence
Dar said licenses for 3-G spectrum of mobile phone would be auctioned in a transparent manner in order for the mobile industry to grow further.
Fresh loans to pay old ones
Dar said that he had no option but to continue the old practice of getting fresh loans to pay old ones.
"There is no money to make heavy debt repayments by December and I think that in this situation, there is no harm in taking more loan to repay old debt," Dar said.
The country is still paying off an $11.3 billion International Monetary Fund loan from 2008. Analysts have said it will need to go back to the lender for more to stave off a balance of payments crisis.
The Economic Survey report can be downloaded here.
Correction: An earlier version of the article incorrectly noted some figures in dollar. The error is regretted.
COMMENTS (27)
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@Aamir Ghaznavi: What FYI wrote is exactly in billion if you know how to convert Mil to Billion.
@FYI
I doubt if you know the difference between million and billion ?????
@Polpot:
"Wishful thinking against an Indian growth rate of 81%"? What kind of 'Pot' have you been smoking?!
@Polpot: You Indians really need to stop obsessing about Pakistan (and crosses).
State Bank has foreign reserves of just $6.2 Billion - OMG what if we don't get any more aid money from UK / US and EU ? We are doomed !!!! Bangladesh has 14,105 Million USD in Reserve. Nepal has 3,631 Million USD in Reserve. Sri Lanka has 7,400 Million USD in Reserve. India has 295,200 Million USD in Reserve.
Government to set economic growth at 4.4% +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Wishful thinking against an Indian growth rate of 81%.
The nation has pinned high hopes from PMLN Government and rightly so!
Neither he told how he will manage the problem and how long will it take, but the amount tells us that it will take a long duration to resolve, by the end of december it will increase more, their is a need to cut private expenses of government. He also added that they will increase the percost of electricity by 6rs.
The simple equation is:
If the Government will not loot the tax payers, they will not evade the tax.
Tax payers must know that where government had used their money which was collected by levying different taxes.
In my opinion 90% tax is evaded every year by the tax payers for one reason or the other.
There are hardly few people in the country whose names can be counted on fingers who pay 100% tax.
The relation between the Tax Collector and Tax Payers in understandable, but what is the relation between Tax Collectors and Income Tax Lawyers who are playing the role of "Income Tax Brokers"?
@Xnain: When @Hamza saw it, it said $16 trillion instead of PKR16 trillion. That is why he and many others commented on that number.
The usual blame game. " We will need to address all the causes of loadshedding.” Sir , there is one major cause and that is resource crunch to buy fuel to produce electricity. Finance Minister has an agressive plan to solve the circular debt within 60 days . What is the plan sir ? (except KSA's offer of fuel on deferred payment).
FM believes if the economy is revived, terrorism can easily be dealt with. True but terrorist activities keep the investor's away including flight of capital . it is a vicious circle.
Good that Mr Dar has said he will 'tackle' all the problems facing the economy. Not so good that he has not said HOW.
He says he is going to 'reduce non-payment of electricity bills'- this from a man who is the chief accountant for Ittefaq Group whose economic fortunes rest on the theft of electricity from WAPDA.
He says he will 'restore the confidence of investors'- this from a man whose government froze all US Dollar deposit accounts in 1998.
He says, inflation 'should remain around 8% and we will try not to add to that'. This shows a remarkable tolerance to high levels of inflation and ignorance of the damaging effects for the economy, competitiveness and the distribution of real income. Ergo, the rich get richer and the poor poorer.
He says he will deal with the 'flight of capital'- he might start with the Billions of Dollars the Sharifs have salted away in foreign bank accounts.
Finally, he says 3-G mobile phone licenses will be auctioned 'in a transparent manner'- this from a man whose government gave us the Yellow cab scheme and the Lahore-Islamabad motorway so that they could line their own pockets with massive kick-backs.
REALLY?
FBR has let down the Nation because of their dismal performance.FBR has become dysfunctional. The ex-Chairman and Senior Member FBR should be held responsible for the failure and so also the present Member Inland Revenue who has been at helm since January 2013.
FBR needs to be totally revamped and made efficient organisation so that more tax is collected
As mentioned by many above and specifically by Pervaiz Lodhie Pakistan is a nation of promise that needs the discipline of managing a nation's many resources of which its young children both male and female is the most important. Education is the key to building a successful and strong democratic nation and healthy growing economy. No nation can hope to exist or grow without an educated youth
“We believe if the economy is revived, terrorism can easily be dealt with.” Fully agreed. What most of the readers find hard to understand is that should we invest first on education or on industry and infrasturcture. Though the answer is tricky but we have to have a good economy first. Why? Because even if we spend a higher chunk on education, education itself may not result in economic growth/development. So first thing is to have enough growth to absorb the unemployment. Once we have kicked start our economy, the probably we can start investing significantly in education because education would then fuel the economic growth. So rightly said Economy,economy and economy
@hamza khan: Yes thats true. Pakistan's public debt has risen to circa 16 Trillion PKR.
every thing is there in Pakistan if there is lake of some thing that is only sincere people and devoted politicians.
Good to know the Minister is observing Namaz intervals during the work time. May Allah help him.
ET, please correct. It is $2.9b NOT $2.9m
EDUCATION-EDUCATION-EDUCATION fro EVERY child in Pakistan even if you have steal, borrow, snatch, from other programs or resources. Education for All is the LAW (Article 25A) yet to be enforced. Pakistan is going to shamefully default on NOT meeting Millennium Development Goals (MDG) 2015 it agreed to unless an aggressive Education budget of 5% or over is set now.
Pakistan has more wealth than most nations. For over 50 years some is stolen, some is mismanaged, some is unmined, some is undiscovered, some is unused. You only need good managers, good engineers, good workers. Pakistan can and should turn around overnight if priorities are set right and action begins today not tomorrow.
Can you change the symbol please?
"Dilation about the overall debt will cross $14 trillion by the end of June, he explained. Giving a break up, he said that the debt had risen by as much as $7.5 trillion only in the past five years."
Debt of $14 trillion? Is this Pakistani debt or US debt we are talking about? ET does someone check stuff before it prints?
Not "will do" ,"should have to" tackle debt crisis.We heard a lot "will do" last five years
ET $14 trillion debt? really?
HORRIBLE REPORTING! Trillions! Really!