News
‘Government missed all macroeconomic targets’
* Fiscal deficit termed only exception during the first quarter of current fiscal
ISLAMABAD: Speakers at a moot titled “Economic Review” on Thursday claimed that the performance of the incumbent government has been very poor and it missed all the macroeconomic targets, excepting fiscal deficit during the first quarter of the current fiscal.
Former finance minister Hafeez Pasha expressed these views while speaking at the event organised by the Institute for Policy Reforms to review the country’s economic performance for the first quarter (July-September) fiscal 2014-15 as well as government’s economic performance scorecard vis a vis objectives set in the 2013 elections manifesto. He said the current fiscal year will close with fiscal deficit of 6 percent and inflation would be around 6 to 6.5 percent, which was low but still on the higher side given the decline in prices of oil and essential commodities in the international market
Criticizing the government policies, he said fiscal deficit was achieved in the first quarter by squeezing release of development funds which was only 8 percent against the benchmark of 20 percent releases. The government decision to impose regulatory duty on wheat and sugar as well as increase electricity prices would contribute to inflation. Pasha pointed out that the international wheat price declined by 20 percent while its price in Pakistan is on the rise. He said that price of flour would go up by 8 percent due to government decision to impose regulatory duty on wheat.
Former minister regretted that when the price of sugar in the international market was on the decline, the government increased sugarcane price to Rs170 to Rs180. International commodity prices have declined in recent months, but these were yet to be transmitted to domestic prices, he added. He said investment was very low and private credit grew by Rs5 billion in the first quarter as opposed to Rs32 billion in the same period last year. He said it was unclear how the government planned to deal with the uncertainties in both political developments as well as the possibility of a hiatus in the ongoing International Monetary Fund (IMF) programme. He hoped that the Fund’s Executive Board would release the 1.1 billion dollar fourth and fifth tranche.
Tax collection remained a concern. First quarter receipts alone showed a shortfall of Rs49 billion. Outlook on growth is uncertain. The economy was unlikely to achieve the targeted growth rate of 5%. He forecast a growth rate of 3.5 to 4% for the current fiscal year. Public finances targets too were uncertain. Fiscal deficit target will worsen if tax collection continued to slip and the energy circular debt was not settled. IPR forecast a fiscal deficit of 5.5% to 6% of GDP higher than the target of 4.9%. BoP improvements were contingent on IMF’s decision on the next tranche. If that was postponed again, the rupee value would decline despite increase in home remittances. Investment would also fall short of target at an estimated 14% to 14.5% of GDP.
Chairman IPR, Humayun Akhtar Khan stated that the country’s economic growth rate is a source of concern. For a number of years economic growth has remained much below four percent and there seems to be no improvement in the first quarter of the current fiscal year. In response to a query Pasha said that the Finance Ministry was dominating not only in the financial sphere but also political sphere. He said that poverty has been increasing by three million annually and since 2008 middle class has been shrinking. Pasha said that middle class, which was 45 percent of the total population during Musharraf rule, has shrunk to 30 percent of the total population; and in South Punjab alone there are two million idle youth, which can be attracted to crime and militancy.
Pasha deplored what he claimed was the Pakistan Bureau of Statistics gaining the status of gauging and creating statistics at present. About privatisation process, he said that PML-N manifesto was to improve the performance of loss making state own enterprise through restructuring and there is no mention sale of profit making institutions, like OGDCL, PPL etc, shares.
Courtesy www.dailytimes.com.pk