ISLAMABAD: Even with the recent “victories” of Eurobond subscription, and an overwhelming response to the spectrum auction reported by the Pakistan Telecommunication Authority, finance minister Ishaq Dar said on Wednesday that the economy grew at a rate of 4.1% in the first half of fiscal year 2013-14, signaling a slow down in second quarter growth from the 5% the government had reported in the first quarter.
Dar was speaking at a press conference on Wednesday to present details on the economy and the result of his trip to the US where he met with officials at the World Bank, IMF, IFC and financial rating agencies Standard & Poor and Moodys.
While Dar did not share second quarter (October-December) growth figures, an official with the Pakistan Bureau of Statistics though confirmed that the second quarter growth had slowed to 3.2%, dashing hopes of an early recovery. The government had claimed that in the first quarter the economy had grown at a rate of 5%.
Dar said during the first half, the agriculture sector grew by 2%, the industrial sector grew 5.4% and the services sector recorded a growth rate of 4.4%.
The finance minister said Pakistan has received $2 billion payments on account of Euro bonds, floated last week. The fresh external borrowings have served to return the official foreign currency reserves to the level from where it started coming down over a year ago. Dar said reserves with the State Bank of Pakistan alone had increased to $6.9 billion, while the total reserves, including commercial banks, stood at $11.67 billion.
Dar also defended the recent Eurobond subscription, maintaining the fresh borrowings will not increase the total debt of the country as the government will retire the domestic debt by the same amount. He added that the criticism against high cost of borrowings was also unjustified, explaining that interest rate in the range of 7.25% to 8.25%, the bond-backed borrowings was still cheaper than the domestic borrowings with savings of an estimated $90 million per annum.
Analysts said that this claim will remain true as long as the rupee-dollar parity remains at current rates for next ten years. The day rupee will start depreciating the cost of bond servicing will automatically increase, according to analysts.
Giving details about the Eurobond, Dar said they were over subscribed by 14 times, receiving a total of $6.9 billion worth of offers. Of the offers, Dar said $3.9 billion were for five-year and $3 billion were against ten-year papers.
Dar said the United States has also promised releasing $380 million within this month out of outstanding $1.5 billion dues of the Coalition Support Fund. He said $1 billion from World Bank under a programme for energy and taxation areas is expected by May 1, 2014.
The finance minister added that the Asian Development Bank was also expected to approve $400 million for the energy sector in the last week of April.
Dar lamented that due to its low foreign currency reserves, Pakistan does presently qualify for commercial lending from the WB. The WB’s conditions commercial lending to the borrower country having sufficient reserves to finance at least three months of import bill.
To this effect, Dar said the government is advancing its deadline to increase the country’s reserves to $15 billion by three months to September.
He added that in the last week of May, the WB is expected to approve $600 million for Dasu dam while the remaining $3.2 billion, required to complete the first phase of the project, will be provided by the WB in next three years. The WB had also agreed to arrange for an International Investment Conference in New York to help Pakistan raise funds for Diamer Basha dam.