Government to provide Rs250 billion subsidy on electricity: Dar

Dar says efforts will be refocused to build foreign exchange reserves. Payments from World Bank, IFC expected soon.

ISLAMABAD: While Finance Minister Ishaq Dar said on Friday that reforms have been introduced to broaden the tax base in order to generate revenue, and that foreign exchange reserves were behind targets, he also announced that the government will be pumping in Rs250 billion subsidy on electricity to help the beleaguered energy sector drive the GDP up, Radio Pakistan reported.

Addressing a press conference in Islamabad along with an International Monetary Fund (IMF) mission, Dar said after clearing the circular debt in the power sector the government has given Rs80 billion in the subsidy since June. He added that during the current financial year, government could provide as much as Rs250 billion subsidy.

The financial institution had in September extended Rs6.67 billion, and an IMF mission was in Pakistan for the past ten days evaluating if the country had hit all the benchmarks, which would allow release of the next tranche of $550 million.

Dar said during the under reviewed period of July-September of this year, economic growth and revenue collection was better than what the IMF had anticipated. He revealed that the Federal Board of Revenue (FBR) had collected Rs469 billion in taxes, which were higher than the IMF’s target of Rs436 billion but far lower than the official target of Rs506 billion.

The difference between Pakistan and the IMF’s tax target was because the IMF had projected that the FBR will collect not more than Rs2.345 trillion while the official target was Rs2.475 trillion.

On the privatisation front, the process of finding strategic partner to sell PIA’s share was moving ahead.

Dar acknowledged the urgency to build the foreign currency reserves, which have been depleting at a faster pace despite the country entered into an IMF programme. He said the government was expecting $1.5 billion from the World Bank before end of this fiscal year, including $700 million for the Dasu dam. He vowed that Pakistan will build Diamer Basha dam’s storage by using its own resources.

“From now our entire focus will be on building foreign exchange reserves”, said Dar. He said the balance of payment problem was due to heavy past borrowings, resulting in net negative outflows. Pakistan missed the quantitative performance criterion on net international reserves.

But Dar had explanations for this, saying a delayed disbursement of Coalition Support Fund worth $322 million and non-realisation of Etisalat receipts worth about $800 million were the cause for this.

But Franks said there were difficulties on balance of payments side. The net international reserves target

Secretary Finance Dr Waqar Masood said despite missing the target, Pakistan will not require a waiver from the Executive Board of the IMF, as there were problems in definition, which the IMF will improve. According to another official, Pakistan asked the IMF to change definition of usable gross international reserves.

Dar said that the International Finance Corporation has also decided to provide trade facility of $300 million to Pakistan which would help boost reserves.

Further, Dar said the government was hopeful that it would be able to achieve the target of foreign exchange reserves of $20 billion dollars by the 2016.

While briefing on the projects that have been approved, Dar said the premier has approved the construction of 0.5 million housing units for middle and low income groups He further added that transparency would be ensured in the implantation of the housing project.

Despite being cash strapped, the finance minister said that the government will fulfil its promises regarding the income support programme, ensuring a social safety net.

The minister informed that first payment for the income support programme has been made and an automatic process has been put in place to make sure that payments reach to recipients automatically.

Dar added that the the government has decided to initiate the preliminary work on Bhasha Dam project from its own sources and that US has already approved 20 million dollars for the environmental study of the project.