News
Saturday, June 05, 2010
Economic recovery fragile* Finance adviser says consolidating recovery will require hard work
* Terms govt’s economic performance unsatisfactory
* Dire need of revamping tax structure for raising tax-to-GDP ratio
* Slow recovery due to govt’s tough decisions, especially to adjust fuel, energy prices
* GDP target of 4.1% achieved despite challengesBy Sajid Chaudhry
ISLAMABAD: The economy is showing signs of recovery, however, this recovery is fragile and the coming years would be more important and require hard work for consolidating it, Adviser to the Prime Minister on Finance Dr Hafeez Shaikh said on Friday.
Talking to reporters at the launch of the Economic Survey 2009-2010, Dr Hafeez termed the economic performance of the present government unsatisfactory, and said the challenge now is to steer the country out of these difficult times and consolidating the signs of recovery into sustained growth.
He said there is a dire need of revamping our tax structure for raising the tax-to-GDP ratio. “We have to improve the entire taxation system ourselves for raising revenue,” the adviser added.
Dr Hafeez said the slow economic recovery was due to the tough decisions that the present government had taken, especially to adjust fuel and energy prices with the international prices. He said tackling seasonal volatility in the agriculture sector and turning the industry into a real growth engine in the future were the major challenges. He added that next year’s budget would try to simplify the tariff structure for the industry so that it could perform on predictable basis.
Minister of State on Finance Hina Rabbani Khar said the Tokyo Donors’ Conference had pledged $5 billion, however due to the situation faced by the donor countries, $2 billion had not been realised during the outgoing fiscal year. She, however, said, “Now we are expecting disbursements of the amounts pledged within the next three years.”
Author of the Economic Survey and Principle Adviser to the Finance Ministry Sakib Sherani said the country’s economy is on the path of recovery and moderate growth with tough challenges ahead to consolidate this recovery into sustained economic growth.
He, however, pointed out the economy had faced a major setback in the form of the energy crisis that reduced growth prospects by 2.5 percent of the GDP in the ongoing fiscal year that could have been above 4.1 percent. He also said the economy had borne huge costs due to the war on terror, with $43 billion between 2001 and 2010 and approximately $7.4 billion or 5 percent of the GDP during the outgoing fiscal year 2009-10.
According to the survey, economic growth target had been crossed despite the challenges by achieving a growth rate of 4.1 percent during the outgoing fiscal year.
The economy had been impacted due to the following factors: decline in GDP growth, reduction in investment, lost exports, damaged physical infrastructure, loss of employment and incomes, diversion of budgetary resources, to military and security-related spending, cutbacks in the Public Sector Development Programme, capital, and human capital flight, reduction in capital and wealth stock and exchange rate depreciation and inflation.
Fiscal deficit remained a major concern despite strict IMF supervision, as the provisional budget deficit remained 5.1 percent of the GDP in 2009-10.
Courtesy www.dailytimes.com.pk