Shahzad Paracha and Ghulam Abbas
ISLAMABAD: Finance Minister Ishaq Dar said that Pakistan has an alternative plan in case we could not get the $2.4 billion pending amount from the IMF of ninth and tenth review.
During a post-budget press conference in Islamabad, the Finance Minister said that Saudi Arabia and UAE have given confirmation to transfer additional $2 billion and $1 billion loan respectively till June 30, 2023 so that’s why we have mentioned in the budget documents.
As for $2.4 billion IMF funding, he said that i have requested the IMF to complete the ninth review as tenth review is not possible now and we are expecting $1.4 billion from IMF and waiting when this will be transferred.
“If IMF funding is not arranged then we have an alternative option because Pakistan has paid more than $3.5billion to commercial banks due to which not only our external debt has been reduced by almost four billion dollars but we are expecting relief from commercial banks”, he added.
On another question, the Finance Minister replied that “As far as Paris Club rescheduling, we have no such plan on our menu. We will not go for rescheduling multilateral debt.
“We will make the payments on time and when they become due,” he said, ” I don’t think it is a dignified way to go and tell them that we cannot pay. That means you’re declaring yourself that you are not in a position [to pay],” he clarified.
The government can talk to bilateral partners for debt rescheduling but stressed that the relief will not include “haircuts or write-offs’ ‘, you negotiate for a longer term and this is nothing unusual because of covid, flood catastrophe and other things and we can consider bilateral debt rescheduling on backloading the principal and focusing on debt servicing, on the other hand, he vowed that we will pay to multilateral creditors on time”.
The Finance Minister also said that while requesting a debt restructuring or write-off was not on the table, negotiations could be pursued for extending the repayment period. This option existed and could be explored after the budget process, he added.
Dar insisted that there were no plans to approach multilateral or development institutions to request debt rescheduling, emphasising Pakistan’s commitment to meeting its obligations.
The minister emphasised that there was no requirement for rescheduling domestic debt, expressing concerns about its impact on the government’s ability to function effectively.
This is not the right time to go domestic debt rescheduling as we have now 22percent policy rate. when we have a reasonable policy rate then we will go for domestic debt rescheduling, he added.
Dar pointed out that the previous government had revoked the practice through amendments, which resulted in commercial banks benefiting and an increase in the policy rate.
The Finance Minister said that there had always been a plan to make Pakistan self-sufficient and self-reliant. He firmly stated that Pakistan will not default, adding that those who talked about default had themselves made mistakes and were complicit in the economic losses incurred by the country.
The minister stated that dignified nations should take proactive measures to prevent economic defaults, noting that Pakistan had also followed the same approach.
The Finance Minister said that the government is working on developing T-bills which will be provided directly to the general public rather than giving banks so this will break the monopoly of powerful sectors. Everyone will see a positive improvement in upcoming days, he added.
Regarding subsidies, the minister acknowledged that the government had provided numerous subsidies. Specifically, he mentioned that over Rs900 billion was allocated solely for the power sector.
He underlined the need to address and improve this sector, highlighting the efforts made thus far. He also noted that the power sector had been a significant “stumbling block” in the talks with the IMF, but it remained an area of focus.
Furthermore, he mentioned the emphasis placed on renewable green energy and clarified that no new subsidies were being introduced in this sector.
The minister addressed the circulation of another report regarding the withdrawal of sales tax on edible oil, clarifying that no such withdrawal has taken place.
When asked about the government’s promised targeted subsidy for motorists regarding fuel, the minister clarified that the plan involved charging vehicles above 800cc a higher rate, while those below 800cc would receive a discount of Rs50 on fuel.
He mentioned that although the plan was feasible, it faced challenges in terms of “current lending and borrowing process we are undergoing”.
However, he said that this matter was unrelated to the budget.
Responding to another question, the Finance minister said that the government has allocated funds for upcoming elections in the budget and JUI-F is our allies and our constitutions have room for delaying elections for one more year.
Our intention is clear so that’s why we have allocated funds in the budget but we respect our allies, he added.
Regarding the question on the pending dispute with Etisalat, he said that the Pakistan case is very weak. Now we have around 30 to 35 properties issued with them and one property is very expensive but regretfully it has been occupied.
Etisalat board has approved an amount of $263 million but we are trying to get more from them. The contract was signed in very haste and if they go to international court then we can lose the case, he added.
Explaining budget measures, he said that the government’s proposal to increase the salaries of government employees by 30pc-35pc and a 17.5pc in the pensions of the retired persons.
There would be a raise of 35pc in the salaries of employees from grade 1-16 and 30 per cent to grade 17-22 employees aimed at increasing their purchasing power.
Besides that, the government proposed to fix the minimum pension at Rs 12,000 and raised the minimum monthly wage from Rs 25,000 to Rs 32,000.
The government has budgeted total current expenditure at Rs13.3tr for FY24, which is 53pc higher than last year’s budgeted figure. Of that, defence expenditure constitutes Rs1.8tr, 15.4pc higher than last year’s budget, making up 1.7pc of GDP.
The government has projected a fiscal deficit of Rs7.57tr (7.1pc of GDP) for the upcoming year, which is the highest in history, surpassing the Rs6.4tr recorded during the current fiscal year. This will be partially offset by an anticipated Rs650bn provincial cash surplus, bringing the consolidated deficit to Rs6.9tr or 6.5pc of GDP.
Interest payments, or debt servicing, budgeted for FY24 have risen a whopping 85pc from last year to Rs7,303bn — accounting for 55pc of total current expenditure — making it the single largest expenditure of the government.
The tax collection target for the FBR has been set at Rs9.2tr, which is 23pc higher than last year’s target.
Following last year’s actual high inflation at 28.2pc, the government set a target of 21pc for the next fiscal year.
He insisted that the proper and transparent implementation of the PSDP would facilitate the attainment of a 3.5 per cent GDP growth rate with ease.
He emphasised that it should be a national goal to steer Pakistan towards the path of development.
The minister shared the government’s aim to bring about an agricultural revolution, underlining that the country possessed significant untapped potential in this sector.
Dar highlighted that debt servicing constitutes one of the largest portions of the current year’s budget. He said efforts would be made to reduce this burden and reverse the prevailing trend.
Dar emphasised the importance of starting somewhere, stating that with economic growth, positive changes will follow.
He highlighted that employment opportunities would increase, leading to the correction of macroeconomic indicators, a reduction in inflation, and the creation of more jobs. Consequently, the policy interest rate would also decrease, he added.
The minister stated that there was a customary practice of forming two committees within the FBR — one for business-related issues and the other for technical matters.
Regarding the GSP Plus status, he noted the involvement of human rights and political influence, mentioning that the commerce ministry and Foreign Office were proactively handling the matter. He expressed hope for the extension of the GSP Plus status for the country.
