ISLAMABAD (November 20 2008): The Federal Cabinet has approved economic stabilisation plan and directed the Ministry of Finance to finalise negotiations with International Monetary Fund (IMF) for reaching a formal agreement.
The special Cabinet meeting with one point agenda to review the overall economic situation held with Prime Minister Syed Yousuf Raza Gilani in the chair on Wednesday was of the view that accepting IMF facility was the only option to stabilise the economy and put the country on road to development and prosperity.
Advisor to Prime Minister on Finance Shaukat Tarin briefed the meeting on latest interaction of the government with IMF and latter's projected commitment to accept Pakistan's home-grown Economic Stabilisation Plan.
On Standby Facility offered by IMF, he informed the meeting that the Programme is spread over 23 months (7 Quarters), involving $7.6 billion at the interest rate of 3.51% to 4.51%. The Standby Facility will be approved by the IMF Board and a minimum of $3.2 billion will be credited to the State Bank of Pakistan (SBP) account in New York immediately after the approval, he added.
He said that contrary to the general impression in the country, IMF has never asked specifically for levying tax on agriculture sector. The IMF only asks for improved tax enforcement and tax to GDP ratio. The IMF facility was the best option to move forward for economic stabilisation, containing inflation, increasing forex reserves and containing budget/current account deficit, the advisor added.
Tarin said that increase in interest rate by 2% will not only control the core inflation but will also help in raising the saving by 2%. It was informed that with better financial discipline, the inflation will soon start coming down.
The meeting was told that the government has put in place a multi pronged strategy aiming to bolster overall economic scene during CFY-2008-09 in vital economic sectors like checking devaluation of rupee, reinvigoration of privatisation programme, expediting inflow of pending instalments from already privatised units, floating of workers remittances-based securitization bonds, FDI, and getting support from Friends of Pakistan.
Shaukat Tarin further briefed the cabinet on an urgent need to develop an integrated energy generation and conservation plan in a manner that could boost our agriculture, industry and other production sectors. The capital market needs to be strengthened. Banking sector's participation in overall economic development and support to the small investors merits special attention.
Advisor on Finance underlined the need for infrastructure development on nation wide basis which is to be attached utmost priority. He said that the government is making all out efforts to create a social safety net to protect vulnerable groups of the population through extending outreach of Benazir Income Support Programme that shall incorporate comprehensive transparency while covering the poor sections of society.
He said that the government is putting in place 5-10 years development rolling plan with prefixed goals which also contains six quarters rolling forecast in terms of best possible economic planning and development. Planning Commission has been geared up for this objective. A Policy Board is being formed to implement the decisions.
Shaukat Tarin further briefed the cabinet on comprehensive package that focuses working out a stabilisation of macro-economic indicators and all Government's initiatives are likely to be in place by end January 2009.
He said that government has planned to bring down inflation to less than 10% in 24 months, simultaneously scaling down fiscal and current account deficit, besides paying special attention to mobilisation of additional internal resources.
The problem of circular debt needs to be broken down through instituting special measures, the Cabinet was briefed. The meeting was also informed that the government is prioritising all PSDP projects at federal, provincial and local levels. The programme audit of all PSDP projects by internationally recognised agencies, of the ongoing processes to streamline expenditure and rationalise the development projects, shall be put in place. What the government would emphasise is that all development projects must have a pilot project to ensure success of subsequent full cycle projects.
The cabinet was informed that agriculture is key to economic prosperity in Pakistan and its development must incorporate a pre-defined income security mechanism for farmers that could lead to productivity enhancement and high value crops, focusing internal consumption and enhanced export needs/standards.
The meeting was told that the government shall put in place a system of infrastructure development to create competitive industrial base and special economic zones, which, currently is facing a downslide.
The Government is planning to encourage Pakistan's access to EU and US market, besides encouraging FDI and introducing organisational reforms in BOI to create greater efficiency and put in place professionally defined sectoral windows to facilitate domestic and foreign investment.
The Prime Minster said that good governance is the key of success as people have given us the mandate for change and in this regard huge responsibility rests on all the elected representatives. He directed the Ministers to set their own targets in their respective ministries aimed at changing the destiny of the people and also ensure its efficient implementation. He said that he would visit each Ministry to get a briefing on their future plan and their current performance.
