Minister of Finance Shaukat Tarin said here on Wednesday that the National Finance Commission (NFC) has been able to resolve pending issues like Net Hydel profit for NWFP, Gas Development Surcharge (GDS) for Balochistan, General Sales Tax on Services for Sindh and additional security expenditures borne by the provinces.
Talking to reporters at National Library after launch of a book "A Journey of Grassroots Development" written by Shoaib Sultan Khan of Aga Khan Rural Support Programme, he said that there was a backlog of 19 years that PPP government had to clear along with finalising new award. The government has been able to settle decade old pending issues like Net Hydel profit for NWFP, GDS for Balochistan, sales tax on Services for Sindh and additional security expenditures.
He said that on the vertical distribution of resources there are many proposals by the provinces seeking provincial share to 60% or over it, however, it has been decided that NFC meeting scheduled at Peshawar to discuss this issue at length. Despite increase sought by the provinces in provincial share in new NFC award, the federal government would not increase its deficit.
The federal government has shown generosity by accepting many of provincial demands and now its time for the provinces to respond in same manner. Provinces would be required to keep in mind defence, debt servicing and civil government expenditures while demanding increase in their share. Sharing of these expenditures with expenditures would also be discussed in case they kept on demanding increase.
Tarin termed the developments on horizontal resource development side good and said that there was not a big difference between point of view of the provinces in this regard. It has been agreed in principle that horizontal resource distribution would also be based on poverty, backwardness, area and resource generation along with major base of population.
Minister of Finance admitted that additional financing made available by IMF would be used to bridge the gap during 2009-10 in case $874 million aid under $1.5 billion Kerry Lugar Bill did not materialised. The Coalition Support Fund $530 million arrears that were supposed to be paid to Pakistan by September end have been delayed and this amount to be paid to Pakistan by November this year.
He said that US has shown its willingness to cut intermediation cost under Kerry Lugar Bill aid during next two years and Hillary Clinton has assured us this during recent US visit. He said that Budget deficit was envisaged at 1.3% of the GDP for the first quarter July-September period, however, due to few events it is to end up at 1.5% or 1.6% of the GDP for the first quarter
About the budget deficit, he explained that government had to spend 35 billion additional due to payment of salary to government employees that was to be paid to by October was paid by September due to Eid. Advance tax of around Rs 25 billion that was due by September 15 is now to be collected by October 15, 2009. Coalition Support Fund arrears of $530 million that were supposed to be paid to Pakistan by September end have been delayed and this amount to be paid to Pakistan by November this year. Despite slippages of Rs 100 billion in first quarter Jul-September period budget deficit was to reach at 2% of the GDP, however, the government has managed it to keep at 1.5%.
Responding to different questions, he further said that against the Friends of Democratic Pakistan pledges of $5.3 billion Pakistan is eyeing $4 billion support during two fiscal years $2 billion in 2009-10 and $2 billion in 2010-11. Some $2 billion FODP money was supposed to be utilised through our system in 2009-10, however, he said that after excluding US 874 million Kerry Lugar Bill money, Pakistan should receive $400 million in each quarter of the current fiscal year's coming three quarter October to June.
To a question, he said that the risk rate on Pakistan's sovereign bond has decreased to 8.5% and it is being projected that it would further come down to 6%. Although the Asian Development Bank and Multilateral Guarantee Agency (MEGA) has shown willingness to guarantee Pakistan's bond, Pakistan would not opt for bond at this point of time.
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