Budgetary adjustments left to President to decide: caretaker government fails to evolve consensus

The caretaker government in a meeting held here on Saturday could not arrive at a consensus on budgetary adjustments. The meeting was convened to find a way out for offsetting the mounting pressures on economy, as different departments resisted the idea of cutting the original allocations in 2007-08 budget.
According to the finance minister, the govt has paid Rs 54 billion subsidy on oil prices during last 7 months and the subsidy on wheat, fertilisers and other many food related items is costing the national exchequer Rs 24 billion every month.
Sources said that after several hours-long meeting, presided over by Prime Minister Mohammedmian Soomro, the decision on the issue was left to President Pervez Musharraf.
One of the participants of the meeting said: "The meeting discussed overall economic situation and the challenges confronting the economy due to the changed economic scenario in particular, effect of the subsidies on the budgetary projections, costing billions of rupees every month and possible cuts in different public sectors' development programme (PSDP).
He said that Finance Minister Salman Shah gave a detailed presentation before the meeting on overall economic situation and stressed the need for reassessment of PSDP allocations, besides putting an end to the policy of protecting different key sectors through subsidies.
He informed the meeting that the government had paid Rs 54 billion subsidy on oil prices during last 7 months. He said that, likewise, the subsidy on wheat, fertilisers and other many food related items was costing the national exchequer Rs 24 billion every month.
He said the culture of subsidies for every thing was making the economy vulnerable to risks, which demand immediate review of the policy. He said that different key sectors' poor performance had put the government in a situation where it was forced to make massive adjustments in the Public Sector Development Programme (PSDP) and also to cut down other non-developmental expenditures, wherever possible.
The government has already exhausted the option of supporting the economy through borrowing. It borrowed over and above the limit of 4.5 percent allowed under the Fiscal Responsible Law for any particular year and, in practical terms, violated it. This option was no more available for the government. The Fiscal Responsibility Law was introduced by the Shaukat Aziz government. It restricts the government from crossing the limit of 4.5 percent of GDP for borrowing for any fiscal year.
The meeting was given the latest picture on exports. imports, revenue, remittances, borrowing, showing current account deficit position. The meeting was informed that the gap between exports and imports was widening with the passage of time and the government should review its strategy to get better result during the next 5 months of the current fiscal year. The revenue collections figures were presented by Federal Board of Revenue (FBR) Chairman and showed comparatively less increase than the corresponding period of last fiscal year.