ISLAMABAD: Finance Minister Asad Umar on Monday announced the government’s strategy to deliver on Medium Term Economic Framework (MTEF 2019-2023) targets to be finalised by the International Monetary Fund (IMF) later this month.
The “economic growth rate would be the highest in 2023 compared to last 15 years on the completion of five-year term of the our term,” he said without giving a target. He said the PTI-government’s performance should be viewed on how it addresses Pakistan’s ‘three chronic deficits’ — fiscal deficit, current account deficit and the savings and investment gap.
The minister said he would just explain the “strategy” on its Roadmap For Stability, Growth and Productive Employment without giving any numbers because the government was in the final stages of entering into an IMF programme. “We will share all the numbers and targets (of MTEF) once the staff level agreement is signed” with the IMF, he said, adding that the framework had been shared with the IMF by the government and Dr Hafiz Pasha who had prepared an internal outline based on consultative process of the Prime Minister’s Economic Advisory Council (EAC) and the international development partners.
Sharing the MTEF strategy with a few PTI cabinet members, top bureaucrats, representatives of some development partners and media, the finance minister said he would send copies of the strategy to chairmen of the finance committees of the Senate and National Assembly because the PTI believed in strengthening of democratic institutions unlike past rulers who issued sermons on democracy and charter of economy.
Data projections to be released after programme finalised
He took a swipe at anchors for asking the question as to what the PTI planned for the common people. He said the country faced three major issues — unemployment, inflation and the future of coming generations — which required very technical solutions and questions should now be asked how this will be achieved.
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“Because of questions about tomorrow, we have only witnessed how country after country crossed Pakistan over the past 70 years,” he said, adding that the country’s true potential would only be unleashed while thinking beyond news cycles and election cycles. “Sustainable growth would not be achieved by increasing the fiscal deficit, nor by creating balance of payments crises, but when we address challenges on sustainable grounds after resolving all the fundamental issues of the economy.”
The minister said Pakistan was now out of the economic crisis because of the policies of the government that moved “the patient from ICU (intensive care unit) to the ward and would now need stability over the next year and a half before it was put to higher growth journey”.
The trade deficit has shrunk during July to Feb FY19, down 11pc to $21.5bn, from $24.2bn last year while current account deficit had declined by 23pc $8.8bn, from $11.4bn last year.
He said exchange rate correction and duties on non-essential imports reduced import bill by 6.2pc while exports had grown 2pc and remittances gone up by almost 12pc to $20bn.
Going forward, the minister said the structural reforms would put the economy on a growth path. He said he had been approving supplementary grants in almost every meeting of the Economic Coordination Committee (ECC) of the cabinet which meant there was complete breakdown of financial discipline.
He said the budget had become irrelevant because most ministries say they had taken up the allocation with the finance ministry but was declined in budget formulation with the advice to come back after budget for supplementary grant. He promised to put public finance management system in order by withdrawing powers of the finance ministry or even the cabinet to approve supplementary budgets except for some contingency fund.
“This power belonged to the parliament and we are going to give it back to the parliament by putting to an end the Thanedari (sweeping powers) of the finance ministry. There should be sanctity to the budget approved by the parliament” he said adding the finance ministry had taken over financial powers of the principal accounting officers of the ministries and diminished their accountability in the process.
He said the government would also shift central bank’s role to inflation targeting policies in the future. He said exchange rate was not a measure of a strong economy as Pakistani rupees used to be stronger than Japanese yen even though Japan’s per capita income was much higher than Pakistan. “By artificially maintaining the exchange rate, we harm our farmers and exporters and give a free subsidy to foreign traders.”
Mr Umar said the government was currently borrowing loans to pay off the interest of old loans and the primary deficit was almost 2.2pc negative which was unsustainable. To improve revenue collection, he said the government has separated revenue policy from administtation and involved private sector experts to policy making through a separate tax policy unit.
On the other hand, enhanced use of technology would help overcome revenue shortfalls. This would be down through strengthening of Pakistan Revenue Automation (PRAL) and its linkages with the data bank of the National database and registration authority (Nadra). Laws have also been amended to bring the country’s tax collection system at par with modern methods used around the world.
The minister laid greater emphasis on North-South and East-West Trade linkages for regional trade to benefit countries from Turkey to Iran and from India to Afghanistan and up to Central Asian countries for the region to become a part of the world economy. Also, the Islamic banking system would be expanded and given greater role as majority of the Pakistani people preferred Islamic system rather than conventional banking.
He said the victory would look like Pakistan’s economic size growing to $2 trillion by 2047 as predicted by the World Bank from existing $300bn and purchasing power per capital (PPP) growing to $4000 from $1600 at present. He said the government policies would generate 10 million jobs and inflation would be stabilized below 5pc as the SBP moves to inflation targeting framework. Also, the exchange rate will stabilize and exports will rise to $40bn in five years from $25bn at present and public debt would fall below 70pc of GDP from 72.5pc at present.
Also, the government was targeting curtailing fiscal deficit to 4pc from 6.6pc now, address losses of the public sector companies and move 10 million people out of the poverty.
Published in Dawn, April 9th, 2019