KARACHI: Members of the newly-formed Economic Advisory Council ECC on Saturday emphasised rationalisation in development spending and realistic policies to manage fiscal and external challenges.
The ministry of finance constituted 18-member Economic Advisory Council to broach upon critical economic issues and recommend advises in the short to medium terms. The council comprises of 11 economists and academicians from private sector and seven official members.
The first meeting of the council was tentatively scheduled on coming Thursday and veteran private sector’s representatives are set to present their recommendations to deal with the twin deficits.
A council’s member Saleem Raza, who’s served as the Governor State Bank of Pakistan in PPP’s government, said the new government has come up with a strong socioeconomic agenda.
“So, I don’t think they would desire or intend to cut back development expenditures (although) circumstances might force them,” Raza told The News.
“They may go to improve taxes in the medium term,” he said. The government wants to expand number of housing units.
Talks are doing round that the government is mulling to slash development spending to Rs400 billion from Rs800 billion to contain fiscal deficit that swelled to 6.6 percent in the last fiscal year of 2017/18 compared to 5.8 percent in the preceding fiscal year.
Another council’s member Ashfaque Hasan Khan, however, believed that the government needs to revisit the current fiscal year’s budget and reset priorities.
“We can consider cutting down on development expenditures,” said Khan, who’s served as economic adviser to finance ministry during Musharraf’s regime.
He said the unnecessary allocations on new projects while ongoing projects are still underway drain on budgetary resources.
“Projects which need one billion rupees were earmarked with billions of rupees,” he added. “Last government should not present the budget for the current fiscal year.
Khan said the tax exemption given to salary class is estimated to render Rs100 billion in losses to national exchequer in the current fiscal year.
“Tax rates should gradually come down.”
Abid Qayyum Suleri, executive director of the Sustainable Development Policy Institute agreed that development expenditures should be more realistic.
“Right now we don’t have money for development expenditures… last year the budget deficit reached at Rs1,800 billion,” Suleri said. “(Yet) we can’t compromise on debt repayment, pensions, defence spending and day-to-day government affairs.”
The economists said the country has challenges to be tackled in the short and long run.
Balance of payment is a short-term issue. Exports are slow, while imports are growing. Foreign exchange reserves are depleting.
“We can’t rule out IMF (International Monetary Fund) option,” Suleri said.
“Pakistan needs to go to IMF or friends of Pakistan” to reduce current account deficit that widened to $18 billion or 5.7 percent of GDP in the last fiscal year compared to 4.1 percent in the preceding fiscal year.
Suleri said the nine billion dollars that government estimated as monetary needs for the current fiscal year would be to ease circular debt, fill in revenue-expenditure gap, and meet external financing needs.
Khan, however, categorically rejected the need of external financing from IMF. “We have become addicted to IMF. We should not go to IMF.”
“We don’t need (economic) health certificates from anyone,” he added referring to narrative that IMF’s structured program acts as a precursor to inflows from other foreign multilateral institutions.
(This news/article originally appeared in The News on September 2nd, 2018)