‘Govt has no intention to quit IMF programme’: Tarin presents economic blueprint

ISLAMABAD: Finance Minister Shaukat Tarin clearly stated on Friday that the government has no intention to quit the International Monetary Fund (IMF) programme, and formal round of talks with the Fund would be held by the end of September before his departure to Washington in October to have a face-to-face discussion with the Fund officials.

This, he sated, while speaking at a press conference regarding formation of short-, medium- and long-term plans across various sectors of the economy under the umbrella of the Economic Advisory Council (EAC).

The minister was flanked by the EAC members, Minister for Industries Khusru Bakhtiar, Adviser to Prime Minister on Commerce Razak Dawood, Minister for Food Security and Research Fakhar Imam, Arif Habib, Muhammad Ali Tabba, former governor State Bank of Pakistan (SBP) Saleem Reza.

The finance minister said that the government had put in place comprehensive plans, focusing on 14 special sectors of the economy, to ensure planned and sustainable economic growth in the country, and for the first time, inclusive plans have been made in consultation with stakeholders, so these are very much relevant, wherein, ministries would be answerable on their performance to the prime minister on a monthly basis.

“This was after 1972 that such a strategy has been developed by the government under which short-, medium- and long-term plans are being devised by working groups and their implementation would be monitored,” the minister said.

The finance minister said that there were growth cycles of four to five years; however, these were not sustainable due to inconsistency in policies.

Therefore, a comprehensive strategy is aimed at bringing stability and sustainability in economic policies and performances.

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The minister said that the strategy prepared by the working sub-groups of the EAC aims at accelerating growth rates to six percent in three years and to make it sustainable over the medium- and long-term without creating pressure on the balance of payments, and keep the inflationary expectations subdued and generate employment opportunities and reduce poverty by strengthening the social safety network.

It also includes increasing tax-to-GDP ratio by 1.5 to two percent annually and attaining target of $30 billion exports by fiscal year 2023-24 and keep up the momentum in foreign remittances.

The sectors underlined for driving growth through the platform of EAC are agriculture including small farms, micro-enterprises, the SMEs, construction, tourism, and information technology.

This will be achieved through coherent, consistent, and well-coordinated polices between the federal, provincial governments as well as the private sector, he added.

The driver of growth would be to raise investment rate, secure productivity gains and apply technologies for efficient allocations of resources and enhance productive capacity.

Sector driving inclusive and sustained growth would be; (i) agriculture, (ii) small farms, (iii) micro enterprises, (iv) SMEs, (v) construction tourism and digitalisation.

The minister said that from September onwards, performance in these 14 sectors about the execution of the plans would be provided to the prime minister every month.

Hence, the minister said, the plans do not focus only on devising strategies but also on ensuring their implementation, which he said was unprecedented.

Replying to questions, the finance minister made it clear that “the government has no intention to quit the IMF programme and had very positive talks with the Fund, on Thursday.”

The minister said that the next round of formal talks with the IMF would be held by the end of September 2021 and he would be visiting Washington in October to hold face-to-face discussions with the Fund officials.

To another question, he said that Prime Minister Imran Khan has allowed him to talk with the opposition parties on a “Charter of Economy”, if they are willing to talk.

About divestment process of the Pakistan Steel Mills, the finance minister said that the process was fully on track as the expression of interests (EOIs) in this regards are being called by next week.

He said that the EOIs for the PSM would be called in the next two to three days, adding that he has given very short time for bidding.

Tarin said that 60 to 70 percent cost of the plan has already been incorporated in the budget for the current fiscal year and the present government wants the plan to be ongoing even beyond its tenure.

“We have only two years left in which implementation of only short-term programme is possible but Prime Minister Imran Khan wants the programme to continue even beyond the tenure of the present government.”

The finance minister said that he should not be asked for the past and as far as this programme is concerned, adding that the Economic Reform Unit (ERU) would make monthly updates available and quarterly press briefing would also be held to present the performance of the ministries.

The minister said that economic experts of the Pakistan Institute of Development Economics (PIDE) would be helping various ministries to implement the plan and there is no need of fresh inductions into the ministry.

Talking about the performance of the economy, the minister said that the economic indicators are showing positive results, citing Business Confidence Index (BCI) Survey.

The minister stated that textile exports also increased 17 percent, whereas, the country is now exporting mobile phones as well.

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Minister for Industries and Production Khusro Bakhtiyar said the government is focusing on “Made in Pakistan” products to substitute imports.

There has been 15 percent growth in the Large Scale Manufacturing.

He said keeping in view the higher LSM growth, the country’s Gross Domestic Products (GDP) growth, which remained 3.7 percent in the previous year, could go up to 4.5 percent when the final figures would be collated.

He said the government is giving tax incentives to the Small and Medium Enterprises and hurdles are being removed to provide them the credit.

He said an industrial zone is being established on 1,500 acres of land in Karachi and export-oriented industries will be encouraged to make investments in it.

Adviser on Commerce Abdul Razak Dawood said the government’s target is to bolster exports.

The government wants to rationalise imports by encouraging local production and stated that local manufacturing of mobile phones has reduced imports of mobile phones.

Dawood said that his main focus is on raising exports, which would help strengthen the country’s economy.

He said the government has fixed the target for the country’s total exports at $38.7 billion during the current fiscal year out of which $31.2 billion export target is fixed for goods, while the rest $7.5 billion for services sector.

“So far, we are on target in goods’ exports, while we are also hopeful to achieve the services exports’ target,” he added.

The adviser noted that at present, pressure is mounting on the country’s imports, which would be controlled.

The adviser said that the imports of the country are high because traditionally, Pakistan always relied on trade that was not “Made in Pakistan”.

“Now we are implementing the policy of “Made in Pakistan””, he added.

The best example of which is that the number of locally-manufactured mobile phones has now exceeded the number of imported phones, he added.

In addition, he said, industrialisation in the country was increasing because of tariff rationalisation.

He said the government has waived off the tariff on 50 percent raw material for enhancing the manufacturing in the country.

Minister for National Food Security Fakhar Imam said new initiatives are being launched to strengthen the agriculture sector.

The minister said that agriculture sector was badly neglected by all the previous governments and was not included in national mainstream for the last 20 years, adding the agriculture sector was growing on an average of four percent from 1960 and during the last 20 years, it was gradually on a declining trend.

He further stated there is a considerable increase in major crops and the government’s focus is now on improving cotton production by providing quality seeds and other inputs to the farmers on reduced rates.

Due to timely announcement of minimum support price of wheat, local grain output increased by 2.2 million tons, he said, adding that other crops including rice, maize, and sugarcane production also increased.

The minister continued that research institutes would be upgraded to achieve higher productivity in the agriculture sector.

Additionally, he said that support price of wheat was increased from Rs1,400 per 50kg to Rs1,800 per 40kg.

The government is also striving to increase the productivity of the livestock sector.

Dr Ishrat Hussain underlined the need for empowering the local bodies in order to provide basic amenities to the people at their doorsteps.

He said a plan has been prepared to revamp the state-owned enterprises.

Members of EAC Arif Habib and Muhammad Ali Tabba commended the government’s pro-business policies.

Tabba said that more people are showing interest in manufacturing as a result of the government’s policies.

He was confident that the government will surpass the growth target set for the current fiscal year.

Arif Habib was appreciative of the government’s construction package and the housing scheme.

The EAC, in its advisory and capacity enhancement role, will create synergies across various sectors and facilitate active monitoring and pave way for sustained institutional reforms and modernisation of the public sector.

The plan for resolving the circular debt includes reducing the cost of electricity generation by flattening the capacity payment curve through restructuring power producers. This will be done through a combination of re-profiling of project debts, reduction in Return on Equity (EOC) and O&M components of tariffs. At the same time, steps will be taken to boost demand for grid electricity by incentivising captive-to-grid shift and integration of NTDC-KE networks.

It will also include replacing cross-subsidies with direct subsidies, lowering tariffs for high consumption categories, target price deregulation and improving governance through engagement with the private sector.

As per key headline of the EAC Book-I presented during the press conference, steps required to be taken included;(i) contain inflation at acceptable levels;(ii) increase tax-GDP ratio by 1.5 to two percent annually;(iii) attain target of $30 billion exports by 2023-24; (iv) keep up the momentum in remittances;(v) bring coherence, consistency and coordination between the federal, provincial governments and the private sector;(vi) rationalise energy prices and eliminate the circular debt problem;(vii) provide basic public goods and services to the common citizens at grassroots level; and (viii) focus on devising instruments and strategy for bottom up drivers as opposed to trickle-down effects etc.

Under the EAC, the medium- and long-term agenda includes a multi-pronged strategy for institutional reforms in the public sector.

As per the book, short-term agenda includes;(i) devolve administrative, legal powers and financial resources to local governments;(ii) raise investment /GDP ratio by 20 percent through higher allocation for public sector investment;(iii) increase productivity of small and medium farmers, SMEs and a 16 percent increase in average yields of wheat would make the country self-sufficient and reduce food inflation, (iv) give special focus to IT, which will be a game changer;(v) address the high costs of doing business for all businesses but especially exporters;(vi) broaden FBR’s tax net and maximise use of technology and digitisation to enhance tax/GDP ratio by at least one percent per year;(vii) Revamp the SOEs through restructuring, privatisation, management contracts, etc.

Medium and long-term agenda included;(i) Complete CPEC projects especially in agriculture, industrial cooperation, socks economic development and financial inclusion, utilisation of special technology zones, IT parks, incubation and entrepreneurship centres that complement CPEC investments, implement renewable energy policy and national power policy to attain the goal of 60 percent energy generation from non-fossil fuels including hydro, minimise government interventions, regulations and footprint from production, distribution and trading in the productive sectors and allow competitive markets to function.

Additionally, to bring down the incidence of indirect taxes by reducing average GST rates to a single digit, move towards more progressive tax regime i.e. all income calluses to be taxed at lower rates, time bound integrated action plan to capture one percent of the Chinese import market by 2030 that would help double the country’s exports.

The book on expenditure sides noted that there is a need to reduce policy rates and rationalise tax expenditures and regarding action on foreign debt, it suggested canceling drawdowns on wasteful foreign loans, two-year moratorium on foreign borrowings, review interest rates on USD, GBP and EUR Naya Pakistan Certificates.

It further noted: establish economic management committee, prepare, implement and monitor and internal 20 years debt and fiscal consolidation programme, ensure statutory compliance and revise the SBP amendment Act.

The book further stated that the PSDP expenditure to be curtailed, there should be focus on completing viable projects, there is a need for immediately shelving unviable ones, transferring projects to provinces and limiting new projects.

Copyright Business Recorder, 2021