Emergency rescue plan approved: Dar
ISLAMABAD (April 10 2008): The federal cabinet, which met here on Tuesday with Prime Minister, Syed Yusuf Raza Gilani, approved an emergency rescue programme for bringing Pakistan out of financial crisis, primarily an outcome of Shaukat Aziz government's fudged budgetary figures.
Finance Minister, Ishaq Dar, gave a detailed presentation to the cabinet on the wrongdoings of Shaukat Aziz government, seriously damaging Pakistan's fiscal discipline.
Later on, briefing on the cabinet decisions Ishaq Dar who was accompanying Information minister, Sherry Rehman, told medimen that the cabinet took serious notice of the previous government's wrong decisions and gave a go ahead signal to an emergency fighting back programme to pull Pakistan out of fiscal mess by implementing a new strategy based on materialising $2.5 billion on war footing from various sources to plug in current account deficit.
He said firefighting business to correct the economy and putting in place a comprehensive fiscal discipline was already under way. He said the new government will bring down inflation to keep the prices of essential items within the common man buying power besides lessening reliance on borrowing from the SBP. He said the new government will also focus on increasing tax to GDP ratio, push up exports and encourage foreign direct investment (FDI) to take the economy on the strong footing.
He said Shaukat Aziz government intentionally presented underestimated figures in the last budget to show good performance to cheat the masses and get the people votes in the February 18, elections. He shared his presentation with the mediamen giving an outlook of the economy the corrective measures needed and the government strong will to overcome the crisis on war-footing.
It listed tempering of wheat production figures, ill timed export at low rates and then import after two months at 100 percent more rates and fudging of 2007-08, budget figures.
He said that the cabinet decided to take the matter of fudged budgetary projection and other wrong decision of the previous government to the Parliament to fix responsibility and hold those accountable who were responsible of creating fiscal crisis and passing on the buck to the elected government.
He said the Parliament will form a committee of the House to summon any body to whom its members will consider was needed for questioning. He avoided to nominate anybody including former Prime Minister Shaukat Aziz for the fiscal crisis. However, he showed confidence that the parliamentary committee will hold the responsible accountable for wrong decisions to damage Pakistan's economy.
The Finance minister added that previous government's performance economic front in the first 8 months was extremely dismal. It missed all major targets. Agriculture growth was 3.8 percent of GDP against its target of 5 percent, large scale manufacturing 7.5 against 8.8 percent, manufacturing and other sectors were 7.1 and 6.8 percent, showing less growth than estimated in the last budget. He said Shaukat Aziz borrowed massively from the State Bank of Pakistan (SBP) which fuel inflation to give new heights to price hike and make the common man life miserable.
Revenue collection was short of target. The Federal Board of Revenue (FBR) collected Rs 535 billion as on March 31, showing shot fall of Rs 33.5 billion and apprehended less revenue collection of Rs 35 billion by June 30.
He said Shaukat Aziz government allocated only Rs 52 billion for power subsidy but it cost Rs 123.5 billion to the national kitty in first 8 months of 2007-08. Oil subsidy was projected at Rs 15 billion and it in actual terms cost Rs 138.5 billion.
He said the new elected government has inherited sick economy with poor fiscal discipline, but being the people's representative it can not just sit and wait for passing on the time and keeping its balance sheet clean.
He said instead doing nothing the new government has taken the challenge of correcting the economy upfront and started a number of corrected measures. He said the new government was focusing on bringing home $2.5 billion in next two months to keep current account deficit at an acceptable level.
He said as on March 31, current account deficit stood at $8.5 billion and if corrective measures had not been taken it could have gone over $10 billion by June 30. He said the pervious governments during 1999 to 2007 added $5 billion in Pakistan's external debt. He said the government will give top priority to agriculture and manufacturing sectors in the policy making for their better performance for economic growth.
Federal Borrowing from SBP as on 5th April, 2008
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(Rs In Billion)
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Stock as on 30-06-2007 452.1
Borrowing from 1st July, 2007 to 5th April 20 382.3
Stock as 05-04-2008 834.4
Projected Borrowing for FY 2007-08 441.0
Projected stock as on 30-06-2008 893.1
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Macroeconomic Framework 200708
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2006-07 2007-08 2007-08 2007-08
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(July-Feb) (Projected)
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GDP Growth (%) 7.0 7.2 - 6.0
Inflation (%) 7.8 6.5 8.9 10.0
Revenues (FBR) (Rs B) 846 1025 584.4 990
Fiscal Deficit (% GDP) 4.3 4.0 4.6 9.5
Money Growth (%) 19.3 13.7 7.5 19.0
Current A/C % of GDP -6.4 -5.9 -6.2 -9.2
Reserves ($B) 16.0 17.7 14.0 13.7
Reserve Month Imports 6.3 6.4 4.7 4.3
Exchange Rate (Rs /$) 60.4 61.5 61.2 62.0
Board Spread (BP) 209 200 549 600
Credit Rating B1/B +S B1/B+S B1/B+N B2/B
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Business Recorder [Pakistan's First Financial Daily]
