News
Thursday, May 13, 2010
Pakistan may seek another IMF loan plan: finance adviser* Dr Hafeez Shaikh says power tariff will be increased by 6% soon
* Underlines need for doing away with subsidies affecting economyISLAMABAD: Adviser to the Prime Minister on Finance Dr Hafeez Shaikh hinted on Wednesday about seeking a fresh International Monetary Fund (IMF) “follow up loan programme” for the repayment of loans due by 2012.
“In case we’re not able to mobilise the required resources through increasing tax and non-tax revenues – only possible in the medium term – the country would require a new loan programme from IMF,” Dr Hafeez said during his first media briefing at the Finance Ministry. He expressed confidence that the IMF Executive Board meeting, scheduled at Washington on May 14, would approve the fifth $1.2 billion tranche as a standby agreement for Pakistan.
Dr Hafeez also said power tariff would be increased by six percent in the near future, adding someone would have to bear the brunt of an increase in the generation cost due to switching over to costly power generation from oil.
He maintained that Rs 8 billion would be needed to bridge the demand and supply gap of energy if the power tariff is not increased, besides other options such as borrowing from banks or a cut in public sector development programme.
Relief: He said the Pay and Pension Commission had submitted its recommendations to the Finance Ministry and the government would definitely provide relief to the salaried class depending on the fiscal space available to it in the upcoming budget.
The finance adviser said major challenges had been dealt with and the economy needed to be further stabilised to put it on a path of growth to benefit all segments of society. He said right now the country needed a growth model that could help create new employment opportunities and reduce inflation. The current government needs to take some bold decisions to reduce losses of public sector enterprises, which at present are “sucking the country’s resources”.
Dr Hafeez identified the challenges the current government was faced with, including reducing subsidies, attracting private investment for infrastructure, reducing burden on the poor, preserving macro-economic stability, increasing local resources and utilising the country’s good international reputation for realising economic gains.
He expressed confidence that the dispute with Sindh over the Value Added Tax on services would be resolved and negotiations were underway.
He said budget for the next fiscal year would contain corrective measures and a tax regime would be introduced based on incentives for the manufacturing sector and increase in resources through broadening of tax base.
Subsidies: Dr Hafeez also underlined the need for doing away with subsidies, which were affecting the country’s economy. He said if the inefficient industries were not privatised, the consequences would continue to cause losses to the national exchequer.
Citing example of the Pakistan Steel Mills, he said it was going in deficit and incurring a loss of about Rs 1 billion a month. sajid chaudhry/app
Courtesy www.dailytimes.com.pk