Hafeez describes job creation as major challenge

Advisor to Prime Minister on Finance Abdul Hafeez Shaikh said on Monday that the country had not performed well historically in attracting foreign direct investment (FDI), export growth and infrastructure development; however, platform has now been created after efforts of 16 months to mend some of the deficiencies of the economic legacies.

Speaking at Pakistan Innovative Finance Forum organized by Asian Development Bank (ADB) and Karandaaz, the advisor said that the government inherited very threatening economic situation and had to take tough decisions during the last 16 months to restore macroeconomic stability.

The advisor said that though start of restoration of macroeconomic stability is visible, everything is not rosy. He said the there are still challenges and government has to create more jobs to meet the expectations of the people and achieve higher growth rate.

He said that Pakistan has not been good in the infrastructure and according to Asian Development Bank, 8 percent plus of the GDP is required to be spent on infrastructure over the next ten years per annum. The gap is huge and what could be done to bridge the gap to increase the infrastructure development, he questioned and expressed his hope that the conference would come up with some implementable suggestions. The government, he stated, has allocated Rs 250 billion to the PSDP for the projects and challenge is how to cut down the processing time.

The advisor said that some institutional requirement has to be fulfilled before the private sector or other participants can fully flourish whereas a big challenge for the government in the ministries is how to make different stakeholders coordinate and cooperate.

He said the Constitution is federal in nature while role of the provinces is critically important in decision making and the government needs to find out a better way of coordinating between the center and provinces on the one hand and between the international agencies and government on the other hand as well as among various parts of the government and ministries.

He said that all these things do pose a challenge immediately and the government's effort is to achieve a degree of macroeconomic stability, followed by coordination in a better way among different stakeholders and to provide a regulatory framework and incentives.

The adviser said that the government is committed to: (i) fiscal discipline; (ii) role of the private sector; (iii) transparency and good governance, amd; (iv) cracking down on corruption and reaching out to the international community both the multilateral agencies as well as international and domestic private sector.

He said the government has also been trying to create a conducive environment and in spite of budgetary constrains, incentives were provided to the exporters by giving them subsides on electricity, gas and loans and last week the government announced Rs 300 billion additional availability of credit on subsidized rate. As a result, the country is beginning to see exports going up in the four months.

He said that revenue collection has increased 16 percent and if impact of import compression on revenue is added, the number goes up to 20 percent. He said that non-tax revenue during the first four months is more than double as opposed to last year and target of Rs 1.2 trillion of non-tax revenue for the current facial year would be surpassed.

He said that institutions' strengthening is the government's top priority, adding the government has brought in a professional from the IMF at the central bank and given him autonomy for taking decisions. He said his predecessors have been instructing the SBP governors as to what the interest rate and exchange rate should be. He said, "I don't do that, I don't even like to talk much about exchange rate and discount rate."

He said that in Federal Board of Revenue (FBR) one of the top tax experts from the private sector was hired with full autonomy for taking decisions and a new chairman in the SECP was appointed and the government is setting up a Public Private Partnership Authority. He said that the Prime Minister wanted regulatory bodies and other institutions to be transformed and headed by the genuine professionals and there should not be any conflict of interest.

The adviser said the good news is that growth rate Pakistan agreed with the International Monetary Fund (IMF) is going to be surpassed by quite a big margin. The IMF first quarter review was successfully completed as the government achieved all the agreed criteria with the Fund for the quarter.

The government is also setting up Special Economic Zones (SEZs) and there would be a set of tax related benefits for those who want to make investment.

He said, "I am not interesting in keeping more and more authority to myself in the Finance Ministry and have delegated powers to sectors' ministries so as to make sure decisions are taken swiftly and wheel of the government moves faster. At the same time, the government has to do many things in financial inclusion side trying to have better management of the debt."

The adviser said that the government took a bold decision to allow market to determine exchange rate whose stabilization would allow the people to make long-term investment.

He said that a lot of things have been done during the last 16 months - from partnering with bilateral and multilateral institutions, cutting down government expenditure, restoring some level of fiscal discipline, providing incentives to exporters and to narrowing down historically high current account deficit with the purpose - to restore economic stability.

He said, "After these things we are now in a situation where in the last four months of current fiscal year, the government is beginning to see restoration of macroeconomic stability."

In the last four months, he said, investment in Pakistani bonds from abroad reached one billion dollars and foreign direct investment increased in this period by more than 200 percent compared to the same people of the last fiscal year.

The advisor said that for the first time in many years, the current account deficit and primary balance are in surplus, while the stock market, which is a one barometer of confidence, is amongst best performing markets in the world.

Later talking to media persons, he said that China-Pakistan Economic Corridor is important for the development of the country. He added that the CPEC envisages several important projects including those related to energy, basic infrastructure and special economic zones.